India’s Move to Bring the Refined Palm Oil in the Restricted Category: Explanation and Implication
India is cunningly using its option to show its resentment against Malaysian govt stands on the internal matters of India. Thus, at the start of the year, in compliance with the ASEAN FTA and India Malaysia CPEC obligations, reduced the import duty on palm but changed the RBD palmolein import control from free to restricted which is in effect doesn’t breach any of the above FTAs.
| HS Code | Commodity | Present Policy | Revised Policy |
| 15119010 | Refined Bleached Deodorised palm oil | Free | Restricted |
| 15119020 | Refined Bleached Deodorised palmolein | Free | Restricted |
| 15119090 | Other | Free | Restricted |
“Restricted” is a term indicating the import or export policy of an item, which can be imported into the country or exported outside, only after obtaining an authorization from the offices of DGFT.
Principles of restriction?
Under the foreign trade policy 2015-20
- Protection of public morals
- Protection of human, animal or plant life or health
- Protection of patents, trademarks and copyrights, and the prevention of deceptive practices
- Prevention of use of prison labour
- Protection of national treasures of artistic, historic or archaeological value
- Conservative of exhaustible natural resources
- Protection of trade of fissionable material or material from which they are derived
- Prevention of traffic in arms, ammunition and implements of war
Provisions for importing restricted items by private players:
- Import of restricted items shall be allowed under advance authorization/DFIA
- Import of items which are restricted for import shall be permitted under EPCG Scheme only after approval from Exim Facilitation Committee (EFC) at DGFT Headquarters.
It seems the restriction has been imposed under the point 1 of principles of restrictions which has been not well defined. Under WTO trade restrictions can be placed by any signatory under the public moral clause. We will discuss this on some other day in detail.
Problems that can be raised: Since India has not restricted crude palm import and other refined oil import, then the question can be raised on the grounds of putting only RBD olein under the restriction list. India must defend its position in his regard and hopefully India is well prepared if Malaysia goes into international Tribunal.
Further Indian government actions.
India has also imposed similar kind of restrictions on pulses with provisions of import quotas. Thus, down the line the same might be notified in coming days.
Note: There is Quantitative restriction on Tur to an extent of 4 Lakh tons per FY and 1.5 Lakh tons on Peas, Urad and Moong respectively.
Does the restrictions is against the FTA/PTA and Bilateral trade agreement and Obligations?
India ASEAN FTA and India-Malaysia CPEC has been mainly focussing on the tariff liberalization. The Non-tariff barriers under the above treaties is formulated to be remain as it is under the WTO obligations.
Domestic refining and disposal of by-products.
The domestic refining capacity utilization is going to improve. India is importing nearly 150 lakh tons of veg oil with refined veg oil imports remaining nearly 30 – 40 lakh tons. India imports mainly RBD palmolein in the refined oil space. Thus, there will be additional refining of 30-40 lakh tons. Thus, the capacity utilization is improvement.
The rise in production of stearin can be disposed of in the industries such as biodiesel, Oleochemicals, and bakery shortenings. India need not to import stearin and rather look for exporting stearin if the surpluses stockpiles. The problem will be with the refiners on finding refining margins, when the by-products prices are low as compared to the crude palm oil.
Impact on imports of other veg oil
Current spreads are favouring the soft oil imports. With new restrictions on, the importers might continue to even more favour soft oil imports till more clarity comes. The import quantity will be depending on the availability at origins and India’s maximum capacity to take soft oils, with palm oil core demand remaining intact. If the refining margins continues to remain unprofitable, then the refiners will be trading off the margins with the longer period of voyage of soft oils.
In the next article I will be covering
- Impact on Malaysia and Indonesia RBD Olein vs CPO
Malaysia and Indonesia must now look for disposing its RBD olein or otherwise the
- Way out for Indian Importers to look for importing RBD Olein
- India Import situation
- Immediate Impact on the Prices
- What Malaysia Can do?
- Trade readjustments