Malaysia won’t see huge jump from India’s termination of palm oil duty

MPOB says India still imposes restrictions on RBD palm oil and RBD palm olein imports, having revised the policy for both from ‘free’ to ‘restricted’

by SHAHEERA AZNAM SHAH / pic by BLOOMBERG

INDIA’S decision not to extend the safeguard import duty on several varieties of Malaysia’s palm oil would not necessarily improve exports as New Delhi still imposed restrictions on certain refined products of the commodity.

India’s Directorate General of Trade Remedies (DGTR) recently issued a statement of New Delhi’s decision not to extend the bilateral safeguard duty imposed for 180 days since September last year.

Malaysia and India’s relationship has been on thin ice after former Prime Minister (PM) Tun Dr Mahathir criticised New Delhi’s action in Kashmir. India had voiced its anger over Dr Mahathir’s criticism, leading to calls for PM Narendra Modi to ban Malaysia’s palm oil imports.

Malaysian Palm Oil Board (MPOB) DG Dr Ahmad Parveez Ghulam Kadir said India still imposes restrictions on refined bleached deodorised (RBD) palm oil and RBD palm olein imports.

“On Sept 4, the Indian government had imposed 5% duty on refined palm oil to make it an even level playing field. The difference between crude and refined palm oil then became 10%, which pushed importers to buy crude palm oil (CPO) from Indonesia.

“But the restrictions on RBD palm oil and RBD palm olein are still there. The recent announcement by the Indian government is just to honour the 180-day imposition, which was supposed to end on March 2, 2020,” he told The Malaysian Reserve (TMR).

According to Malaysia-India Comprehensive Economic Cooperation Agreement agreement, the import duties of Malaysia’s CPO and refined palm oil are reduced to 40% and 45% effective Jan 1 last year.

The agreement reduced the difference between the CPO and refined palm oil duties from Malaysia to 5.5% from 11%, leading to a sharp spike in purchases from Malaysia in 2019. But the jump in Indian’s palm oil imports had led to a probe by DGTR following a complaint by Solvent Extractors’ Association of India. The move, despite speculations said to be intended to retaliate against Malaysia, was largely to protect India’s refiners.

DGTR recommended an increase in duty rates of 5% for a period of 180 days on the imports for refined products originating from Malaysia.

India’s Ministry of Commerce and Industry on Jan 8 this year had revised the policy of RBD palm oil and RBD palm olein imports from “free” to “restricted”. The restriction has considerably slashed Malaysia’s palm oil export.

In February, Malaysia’s palm oil shipment to India, the largest export market for the commodity, slumped by 55% on a month-on-month basis to 21,130 tonnes from 46,876 tonnes in January, according to MPOB.

The country’s total export last month fell 23.6% to 2.63 million tonnes from 3.44 million tonnes recorded in January.

Palm oil inventory last month also fell 4.2% to 1.68 million tonnes against 1.76 million tonnes in January, while CPO production was up 10% to 1.29 million tonnes compared to 1.17 million tonnes in the previous month.

As of yesterday, the Bursa Malaysia Derivatives Exchange contract for May delivery fell marginally to RM2,322 per tonne.

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