Sign up | Log in



Home  >>   Daily News  >>   Malaysia News  >>   Commodities   >>   Palm Oil import tax raise by India will affect Asean prodcucers
NEWS UPDATES Asean Affairs    24 July 2012

Palm Oil import tax raise by India will affect Asean prodcucers


India's move to raise taxes on its imports of refined palm oil products is likely to put a dent in the earnings of Malaysian and Indonesian refiners of the commodity, analysts said.

The decision, however, is neutral for crude palm oil (CPO) producers as India's CPO imports remain duty-free.

India, the world's biggest importer of palm oil, effectively doubled import taxes last Thursday when it ended a six-year freeze on the base import price of processed palm olein, increasing the cost of imports from Malaysia and Indonesia.

The country currently imports close to half its edible oil needs, and palm oil takes pole position with a 43 per cent share of the edible oil market.

The new tax policy, which lifts the base price of refined palm oil imports to market prices from US$484 (1,535 ringgit) per tonne, is aimed at placating disgruntled refiners in India, who were doubly hit by both the low tariff and cheaper processed palm oil products from Indonesia.

Since Indonesia slashed its export taxes on refined palm oil last October, India's imports have doubled to 1.2 million tonnes for the first eight months of this year over 2011.

CPO futures closed lower yesterday at 2,990 ringgit ($940).

Indonesia and Malaysia, the world's top two producers of palm oil, account for 90 per cent of global output of some 50 million tonnes.

Indonesia supplies 74 per cent of India's palm oil requirements while Malaysia makes up the balance 26 per cent.

Malaysia exported 1.66 million tonnes of palm oil products, or 9 per cent of its total exports, to India last year. In the first half of the year, Malaysia shipped 1.07 million tonnes there, which was 82 per cent more than in the same period in 2011.

CIMB Research said in a client note that the higher tax was estimated to widen the margin advantage of palm oil refiners in India to 7.73 per cent from 3.5 per cent.

“This will allow them to compete better with the Indonesian refiners, which we estimate enjoy a profit margin of 5 per cent to 10 per cent due to the favourable export tax for refined palm products in Indonesia,” it said.

The research unit also pointed out that the levies could make CPO imports more competitive versus processed palm oil, resulting in higher imports of the former to India. “Players that will benefit include all the upstream producers as this will boost demand for CPO over refined palm products from India.

“Refiners like Mewah and Wilmar's refineries in Malaysia and Indonesia could face stiffer competition from India's refiners and this could crimp their refining margins.”

Maybank IB Research reckons the situation could pressure Malaysian policymakers to revisit the current export tax structure as palm oil inventory is expected to pile up in the upcoming seasonally high production months.

“The change further dilutes the competitiveness of Malaysian refined palm oil while Indonesia's refiners' margins could be compressed (for sale to India).

“Malaysia imposes a high export duty on CPO of 23 per cent and consequently, the bulk of its CPO production flows downstream to its refineries. However, there is an over-capacity of refineries in Malaysia, and margins are already negative for some,” it said in a client note.

The brokerage sees two options for policymakers - they could either increase the quota for duty-free CPO exports as an interim measure on top of the approximately three million tonnes awarded earlier this year, or reduce Malaysia's high export duty tax on CPO to a maximum tax rate of 10 per cent from 23 per cent now to mirror Indonesia's tax differential between refined and crude palm oil.

Maybank IB Research is cognisant, however, that a larger quota of duty-free CPO exports may irk refiners, while revamping Malaysia's export tax structure now could prove unpopular coming just ahead of the national polls.

“After all, 39 per cent of Malaysia's oil palm planted areas are owned by smallholders and government agencies, while the bulk of Malaysia's refining capacity are owned by the large listed entities.”

It added that as policy makers continued to deliberate, market forces are “taking their own course”, with millers in Sabah and Sarawak sharing the burden of refiners by giving them discounts in the first half of 2012.

“And effective July, we understand Wilmar (Malaysia's largest refiner with a capacity of some five million tonnes) has discontinued all forward purchases agreements in Malaysia, opting for spot purchases.

“We believe this will give Wilmar stronger bargaining position to demand for even higher discounts especially when CPO tanks (of millers) “overflow” in the coming months.

“Should this happen, purer Malaysian upstream players will suffer' from lower revenue as a result of heavy discounting (vis-vis CPO spot prices) to clear their CPO stocks.”

Reach Southeast Asia!
10- Nations, 560- Million Consumers
And $1 -Trillion Market
We are the Voice of Southeast Asia Media Kit
The only Media Dedicated to Southeast Asia Advertising Rates for Magazine
  Online Ad Rates

Comment on this Article. Send them to

Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below




1.  Verifier

1. Verifier

For security purposes, we ask that you enter the security code that is shown in the graphic. Please enter the code exactly as it is shown in the graphic.
Your Code
Enter Code

Today's  Stories    24 July 2012  Subsribe Now !
• Asean+6 Free trade talks in November  Subcribe: Asean Affairs Global Magazine
• Myanmar Thailand ties come closer on...  Asean Affairs Premium

• Indonesian Middle class grows richer

Research Reports
on Thailand 2007-2008

•Textiles and Garments Industry

•Coffee industry

•Leather and footwear industry

•Shrimp industry

• Aquino refuses to back off island claim with...
• Palm Oil import tax raise by India will affect... 

Asean Analysis              22 July 2012 Advertise Your Brand
• Asean Analysis- JuLy 22, 2012  
• Asean Weekly- JuLy 20, 2012 Sponsor Our Events

Asean Stock Watch      20 July 2012 

• Asean Stock Watch-July 20, 2012 p

ASEAN NEWS UPDATES      Updated: 04 January 2011

 • Women Shariah scholars see gender gap closing
• Bank Indonesia may hold key rate as inflation hits 7 percent

• Bursa Malaysia to revamp business rules
• Private property prices hit new high in Singapore • Bangkok moves on mass transport
• Thai retailers are upbeat
• Rice exports likely to decline • Vietnamese PM projects 10-year socioeconomic plan


This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

The first issue that can’t be answered is the health of Thailand’s beloved King Bhumibol, who is now 83 years old. He is the world's longest reigning monarch, but elaborate birthday celebrations in December failed to mask concern over his health. More


Home | About Us | Contact Us | Special Feature | Features | News | Magazine | Events | TV | Press Release | Advertise With us

| Terms of Use | Site Map | Privacy Policy  | DISCLAIMER |

Version 5.0
Copyright © 2006-2020 TIME INTERNATIONAL MANAGEMENT ENTERPRISES CO., LTD. All rights reserved.
Bangkok, Thailand