Monday November 2, 08:10 PM

Govt must end cheap vegoil imports - trade body

By Ratnajyoti Dutta

INDORE, INDIA (Reuters) - The government must restrict cheap imports of vegetable oils by raising taxes, to encourage domestic oilseed output and reduce import dependency, the chief of a leading trade body said on Monday.

India, which displaced China this year to become the world's top vegetable oil importer, allows tax-free purchases of crude edible oils and imposes 7.5 percent duty on refined cooking oils.

Edible oil purchases by the country rose to a record 8.2 million tonnes in the marketing year ended October, 46 percent more than the previous year.

India's edible oil marketing year runs from November to October.

"Large imports of vegetable oils would force oilseed farmers to switch to wheat, increasing our (India's) dependence on imported oil," Sat Narain Agrawal, newly appointed chairman of the Central Organisation for Oil Industry and Trade (COOIT) told Reuters.

Agrawal said the trade body favoured a 30-percent tax on crude edible oil imports and a 40-percent levy on refined oils to encourage higher domestic oilseed output.

In its latest crop estimates, COOIT said output of summer-sown oilseeds dropped 12.5 percent to 13.1 million tonnes in the crop year that began in July 2009, mainly due to lower groundnut and soybean production.

India's crop year for oilseeds runs from July to June.

COOIT data showed this year's summer-sown soybean output at 8.5 million tonnes against 8.9 million tonnes a year ago, while groundnut production stood at 3.3 million tonnes versus 4.2 million tonnes.

"Dry weather was the culprit for lower summer oilseed production. Continuing with the policy of cheap import tax regime will damage the morale of local growers," Agrawal said.

India's annual June-September monsoon was the worst in 37 years, reducing oilseed area and yield.

He said oilseed growers were now favouring winter-sown crops such as wheat and lentils and the government should check unbridled imports of vegetable oils to encourage domestic farmers to grow rapeseed, the main winter-planted oilseed.

Output of rapeseed is crucial for raising local supplies of oils.

India meets about 44 percent of its cooking oil demand through imports. It purchases palm oil from Malaysia and Indonesia and soyoil from Brazil and Argentina.

(Editing by Malini Menon)