Rise in RBD Palm Oil Import

Context

• According to Solvent Extractor’s Association (SEA) of India, a sharp rise in the import of refined, bleached and deodorized (RBD) palm oil is hurting the domestic oil refining industry.

Reasons for the rise in imports of RBD palm oil

• Import duty difference of only 7.5% between CPO (crude palm oil) and refined oil, encouraging the import of refined oil as compared to the CPO.
• Cutthroat competition: Malaysian and Indonesian exporters of RBD palm oil enjoy advantage (taxes) of $60 over CPO and hence they discount palmolein benefiting their refiners.

Consequences of the rise in imports of RBD palm oil

• Low capacity utilization (30% now versus 60-70% in 2020) of the Indian refining industry.

• For e.g. Utilization of only 18 million tonnes as against the capacity of 38-40 million tonnes.

• Losses: The refining industry will be suffering losses of Rs. 6000 per tonne on importing crude palm oil and converting it into refined palmolein.
• Contrary to the objective of self-reliance: PM’s clarion call of atma nirbhar and value addition within the country is threatened due to rising imports. 
• Harm Make in India: Sustained import trends may cause transformation of the Indian refining industry into mere packers rather than producers and refiners. 
• Compromising heavy investments made in the domestic refining sector for capacity enhancement and possibility of rising Non Performing Assets (NPAs) in the sector.
• Threaten oil seeds farmers: After a long time, domestic oilseeds have started selling above minimum support price (MSP) and improved farm incomes. Continued rising imports of RBD might reverse these gains.
• Edible oil inflation

About Palm Oil

• Nature: Palm oil is also known as palm fruit oil. Palm oil is produced from the fruit of the oil palm tree (Scientific name: Elaeis guineensis).
• Importance: 

• Production: It may have now surpassed soybean oil as the most widely produced vegetable oil in the world.
• Refining: Palm oil is physically refined without the use of chemical solvents, thereby reducing the risk of residue contamination.
• Nutritional value: Virgin palm oil is rich in carotenoids (pro Vitamin A), tocotrienols and tocopherols (Vitamin E). 
• Health benefits: Since it is a vegetable oil; not an animal or dairy product, therefore it does not contain cholesterol. It also does not contain trans fatty acids.
• Value as a natural resource: Oil palm is the only fruit that can give two types of oil-palm oil and palm kernel oil.

• Applications/Usage:

• Agriculture and processing: Since its introduction, oil palm is now a leading agricultural crop. Increased planting, cultivation and refinement have led to the introduction of a wide range of processed palm oil products. 
• Food and non-food applications:They can be used for frying media and for making margarines, shortenings, soap, oleo chemicals and other products.
• Cooking: It is used as cooking oil, to make margarine and is a component of many processed foods. Palm oil is one of the few vegetable oils relatively high in saturated fats (such as coconut oil) and thus semi-solid at room temperature.

• Issues: 

• Palm oil is a major driver of deforestation of some of the world’s most biodiverse forests, destroying the habitat of already endangered species like the Orangutan, pygmy elephant and Sumatran rhino. 
• More than 40 percent of potential landscapes for oil palm cultivation in India overlap with biodiversity-rich landscapes, especially in the North-East and Andaman & Nicobar islands.

Way Forward

• Budgetary Provisions 2023-24: Increasing the duty difference between CPO and refined palmolein to at least 15%.

• Increasing refined duty from current 12.5% to 20% without any change in crude palm oil duty.

• Restricted List: The government can place again the import of RBD palmolein and refined palm oil under restricted list with immediate effect.

Source: TH