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India urged to cut import duty on green palm oil

(Reuters) / 1 November 2010

KUALA LUMPUR - A vegetable oils industry body has asked the Indian government to cut its tax on eco-friendly imports of the commodity by one to two percent in a bid to boost consumption, a top trader said on Monday.

India, the world’s largest vegetable oil buyer, appears to be heeding a call for large consumers to become more environmentally friendly and buy palm oil from estates committed to protecting forests in Southeast Asia.

Dorab Mistry, head of vegetable oils trading arm of Godrej International and a leading analyst, said the firm’s parent spearheaded the Hindustan Unilever coalition of refiners and traders that put the proposal to the government.

“Palm oil prices will eventually come down and when that happens, the duties will have to start rising. We propose there should always be a 1-2 percent discounted duty on green palm oil,” Mistry told Reuters in an interview.

“The duties will come into play, it’s a matter of time. When it does, this mechanism will help, “ Mistry said ahead of a meeting of the Roundtable on Sustainable Palm Oil (RSPO) in Jakarta next week.

Price-sensitive India usually buys palm oil from Indonesia and Malaysia as well as soyoil from Argentina and Brazil to feed its rapidly growing population.

India has kept to a zero import tax for crude palm oil as world prices are high and does not differentiate between certified and non-certified palm oil.

The RSPO assesses the environmental and social impact of oil palm estates and those which meet its standards can sell certificates to consumers for every tonne of green palm, under the GreenPalm trading system.

Mistry said the proposed discount would offset the cost of buying green palm certificates, which stands at about $7-$8 per tonne. Benchmark Malaysian palm oil hit a 27-month high of 3,095 ringgit ($1,001) on Monday.

But the GreenPalm system does not encourage separate supply chains for green palm oil and not so environmentally friendly palm oil, green groups say.

“Segregation of green palm oil is very expensive and does not have any meaning,” Mistry said. “What matters is how palm plantations are developed and managed.

Slower expansion

Greater scrutiny of the way oil palm estates are developed in top producer Indonesia and strict rules have slowed expansion from a peak rate of 600,000 hectares annually during the commodity boom of 2007-2008.

“In 2010, this expansion was between 200,000 and 250,000 hectares. It could slow down further but current high prices will ensure that in 2011, expansion will be at least 250,000 hectares,” Mistry said.

A problem also lies in the availability of suitable land for planting and bank credit, Mistry said. Eventually, slower palm expansion will lead to lower production and bullish vegetable oil prices, he said. ($



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