India to give rice to Indonesia, but wants palm oil tax cut
India and Indonesia have been in talks over rice exports to Indonesia for over two weeks now after the latter said that it needed 250,000 tonnes of rice urgently; the floods in Thailand crippled the country’s regular source of rice.
Indonesia is one of the world’s largest consumers of rice, as it consumes a little less than 3 million tonnes of the commodity per month and this figure is expected to grow rapidly as the population of the Muslim nation is growing at a fair clip.
Earlier this month, Indian Food Minister KV Thomas said, after meeting officials from Bulog, the Indonesian procurement agency, that the country is willing to supply Indonesia from its own government warehouses.
Palm oil levies
However, Thomas also said that he expects Indonesia to make cuts in the export duty it levies on the export of crude palm oil, which is hurting the Indian food oil processing industry.
India, the world’s largest importer of vegetable oil, was negatively impacted by Indonesia's decision to slash the maximum export tax on refined, bleached and deodorised palm oil (RBD) to 10%, while the rate for crude palm oil was left at 22.5%.
“This move is also potentially a fatal blow to Indian refineries and indeed refineries elsewhere in Asia,” a source at the Ministry of Food Processing Industries (MOFPI), who preferred to remain anonymous, told Food Navigator-Asia.com.
Refinery trouble
As a result of the new regime, Indian food industries have begun importing more of RBD palm oil for the festive season in India, which stretches from October to the New Year, putting local refineries in trouble, continued the source.
“This is leaving refining capacity idle. It is not a comfortable situation from them and that is why they [refiners] have requested the highest offices of the Indian government to raise the base price, or tariff value, for refined palm oils,” he said.
Indian refiners have been demanding US$1,200 per tonne tariff value on RBD palm oil, against current norms where importers are taxed 7.7% duty based on the tariff value set at US$484 a tonne.
According to data from the MOFPI, India imports bout 6 million tonnes of crude palm oil every year from Indonesia, while Indian refiners have an annual capacity of 15 million tonnes.
However, Indonesia has till date made no commitment on reduction on the palm oil tax and there are reports in local media in Indonesia and Malaysia that it is not willing to do so in exchange of rice supplies.
