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Indonesia shows no concerns over India's rising import duties

Publication Date : 10-08-2012


Indonesian palm olein producers have played down concerns over the impact of India's rising import duties, saying that demand from the biggest state buyer of Indonesian palm oil derivatives would stay robust.

Last month India removed its US$484 per tonne base price for its palm olein tax valuation, allowing the benchmark to float with the global market price, which currently stood at $1,050 per tonne, effectively doubling the value of duties that must be paid by importers to approximately $80 a tonne.

"Actually, the one that will suffer the most from the policy is India," said Hendri Saksti, the president director of Wilmar Indonesia, a local unit of the Singapore-based agribusiness giant Wilmar International.

Saksti expressed his optimism that refined palm oil demand from India would remain unchanged as India, as one of the world's major buyers of both refined and crude palm oil, "would have to import Indonesian palm oil products no matter what".

Wilmar Indonesia produces 2 million tonnes of palm oil annually, of which 60 per cent is exported to China and India. The company's commissioner M. P. Tumanggor acknowledged that the current global economic crisis would affect demand, albeit slightly.

"Even if there is any decrease in our sales, it will be no more than 10 per cent," he told The Jakarta Post in an interview.

Tumanggor said India's new import duty policy would backfire, particularly hurting local cooking oil producers.

"The policy will make the price [of refined palm oil] more expensive, consequently killing India's cooking oil manufacturing, which accounts for a relatively big share in the country's industry," he said.

The increase of the palm olein export tariff in India is seen as a response toward Indonesia's move to restructure its tax on palm oil products to boost its value-added industry. Export taxes for both refined and crude palm oil in Indonesia previously stood at the same level at 25 per cent, but last year the world's largest palm oil producer slashed tax on refined palm oil to 13 per cent, at the same time keeping the tax for crude palm oil at 22.5 per cent.

The tax restructuring has successfully boosted Indonesia's refined palm oil exports, but consequently hurt major importers of palm oil, including India, whose domestic refineries are struggling to cope with the deluge of Indonesian-made palm olein.

Bakrie Sumatra Plantation president director Bambang Aria Wisena acknowledged that India's new tax "would have some effect" on Indonesian refineries, but added that there were other markets that might compensate the declining demand from India, such as China, Pakistan or some European countries.

Wisena also expressed his optimism that India's new import tax would not disrupt his company’s plan to open a new refinery facility in October, which is expected to produce 1,000 tonnes of palm olein per day.

"Our palm olein products are highly competitive," he told the Post yesterday.


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