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Ceca deal with India safeguards Malaysian palm oil industry's interest, says expert.

Malaysia should not be too worried over news reports that India would probably raise the import duty on refined palm oil, given that both countries have signed the Comprehensive Economic Cooperation Agreement (Ceca).

Palm oil expert MR Chandran said the request to increase the import duty was made by the Indian edible oil refiners through the Solvent Extractors' Association (SEA) and not from the government itself.

'I don't think that India will do this and I doubt that the current import duty on refined palm oil, which is at 45 per cent, will increase because we have the agreement with India and you cannot go beyond the agreed quantum without discussion. You can re-negotiate, but you can't change without telling the other party,' he told Bernama recently.

The SEA, in a letter to India Prime Minister Narendra Modi, has asked the government to raise the duty on refined palm oil imports from Malaysia to protect the local industry following on a surge in inbound shipments from Southeast Asian countries.

Chandran, who is also an adviser to the Roundtable on Sustainable Palm Oil executive board, said if the SEA wants to make Malaysia's import duty on refined palm oil at the same level as its Indonesian counterpart, the association should appeal to reduce the duty on shipments from Indonesia, not by increasing the tariff on Malaysia.

In January 2019, as part of Ceca, India reduced import duties on palm oil, cutting duties on crude palm oil from Asean countries, including Malaysia, to 40 per cent from 44 per cent, and duty on Malaysian refined palm oil to 45 per cent from 54 per cent.

Meanwhile, the duty on refined palm oil sourced from Indonesia was narrowed to 50 per cent from 54 per cent.

India is currently the world's largest importer of vegetable oils, with a monthly requirement of 1.9 million tonnes. Malaysia and Indonesia are the country's main palm oil suppliers.

Meanwhile, palm oil trader David Ng said if the Indian government continued to hike the tax on palm oil imports, there would likely be a demand deterioration in the short term, which would add pressure on the overall stock level in the country.

'Current low prices are mainly attributed to weak demand and high production cycle.

'However, we expect demand to gradually pick up during the third quarter of this year, following the seasonal factors, which will likely support prices at between RM1,900 and RM2,200 per tonne for the rest of the year,' he said.

Ng said an affirmative policy like the biofuel mandate is one of the key initiatives that a government can take to reduce the overall stock level in the country.

'Besides the biofuel policy, one can also step up promotional efforts, especially in marketing palm oil to major destinations like China and India.

'Resolving the prevalent environmental issues propagated by countries in the European Union could be a good step to lift overall demand for Malaysian palm oil,' he said.

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Publication:Malay Mail Online (Petaling Jaya, Malaysia)
Geographic Code:9MALA
Date:Jul 24, 2019
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