India Must Raise Benchmark Import Price of Palmolein (Update1)

June 5 (Bloomberg) -- India, the world’s biggest buyer of vegetable oils after China, must increase the benchmark import price of refined palmolein to prevent a glut of imported edible oils, the country’s second-biggest buyer said.

“The tariff value of RBD palmolein is ridiculously low,” said Atul Chaturvedi, chief executive of Adani Wilmar Ltd., a venture between Adani Group and the world’s biggest palm oil trader Wilmar International Ltd. “Higher tariff will protect local industry and check cheap imports.”

An increase in the tax may help cool this year’s 52 percent rally in global palm oil prices. The tropical oil has surged as soybean crops decline in Argentina, and stockpiles in the U.S. are forecast to reach a five-year low. Palm oil competes with soybean oil for applications in food and fuel.

Palm oil for August delivery on the Malaysia Derivatives Exchange added as much as 1.6 percent to 2,611 ringgit ($746) a metric ton, putting the commodity on course for a weekly gain. Futures were at 2,581 ringgit at the midday break in trading, up 0.8 percent for the week.

Benchmark prices, also known as tariff value, introduced to prevent traders from paying lower taxes by understating edible oil prices, are meant to be revised to reflect global prices. Still, the government hasn’t changed them since August 2006 to ensure supplies to the nation’s consumers.

The tariff on refined, bleached and deodorized palmolein is $484 a ton, while the average cost at Indian ports in April was $803 a ton.

India may slow edible oil imports after stockpiles probably climbed 55 percent to 1.7 million metric tons in May, exceeding normal levels of 1.1 million tons, Govindlal G. Patel, director of Dipak Enterprise, said June 2.

Imports Surge

Purchases surged 82 percent in the six months to April 30 after the government scrapped import tax amid a decline in local oilseed output. India in March ended a 20 percent tax on imports of crude soybean oil four months after it was imposed to shield oilseed growers. Crude palm oil can still be bought tax-free.

“It will be a logical step for the government to impose a 15-20 percent duty on crude palm oil,” Chaturvedi said.

Imports of refined edible oils, mainly RBD palmolein, made up 15 percent of the 4.09 million ton total in the six months ended April, the Solvent Extractors’ Association of India said.

India buys palm oil from Indonesia and Malaysia, and soybean oil from Argentina and Brazil. Palm oil accounts for almost 90 percent of all edible oil imports.