Pre-Budget Memorandum for

Vegetable Oil & Oilseed Sector 2013-14

Indian vegetable oil industry consists of 15,000 oil mills, 600 solvent extraction
units, 600 vegetable oil refineries and 250 vanaspati units spread across the
country crushing / processing oilseeds, oilcakes, rice bran & vegetable oils.
The domestic turn over of the vegetable oil industry is over Rs.125,000 crores
and import-export turnover of about Rs.65,000 crores per annum, consisting of
Rs.50,000 crores for import of vegetable oils & Rs.15,000 crores for export of
oilmeals, oilseeds

castor oil, groundnut oil & vegetable fats of tree borne

oilseeds.
The production of oilseeds is characterized by low yields and hovering around
280-300 lakh tonnes only. The oilseeds are grown mainly on marginal and submarginal lands under low input usage. Moreover, less than 25% of the oilseed
area is irrigated, rendering cultivation vulnerable to weather-related yield risk.
This has resulted in slow growth in oilseed production and continued low yields.
At about 1000 kgs./ha, Indian oilseed yields are about half of the worlds
average and less than one-third of leading producers.
To bridge the gap between demand and supply, country is compelled to import
a large quantity of edible oils.

India has become the largest importer of

vegetable oils in the world. During November, 2011 to October, 2012, country
import is likely to be about 97/98 lakh tonnes of edible oil worth Rs.50,000
crores, a huge burden on exchequer next to crude petroleum products and
gold. It is therefore very essential to increase the availability of vegetable oils
from domestic resources by encouraging diversification of land from food grains
to oilseeds, increasing productivity of oilseeds encourage oil palm cultivation,
place oil palm cultivation under plantation crops and fullest exploitation of
non traditional domestic sources.
increase

This will

improve capacity utilisation,

production & productivity thereby bring the industry

competitive in the international market.

1

to be fully

The biggest beneficiaries would be

the marginal farmers whose entire livelihood depends upon the meager
earnings that they get from a small piece of land.
To achieve this objective we suggest the following measures for consideration
in Union Budget for 2013-14.
Review and withdraw Export Duty of 10% on Deoiled Rice Bran
In the Union Budget of 2011, export duty @ 10% was imposed on only deoiled
rice bran out of the entire basket of deoiled meals comprising of soya,
rapeseed,

groundnut, sunflower etc.

India exported 56.0 lakh tonnes

of

various deoiled cakes/meals worth Rs. 8,500 crores during 2011-12. The share
of deoiled rice bran exported during 2011-12 was a meager 1.75 lakh tonnes,
worth Rs. 140 crores or around 3 % in terms of quantity and 1.6% in terms of
value only.
The entire quantity of deoiled rice bran exported comes from West Bengal.
This is because the dairy and poultry industry

is

not

developed in West

Bengal, so there is lack of local demand. Also, due to very high freight cost, it
is not viable to supply it to dairies in South & West India. Deoiled rice bran
from other states is not exported due to good local demand, hence they are
not affected by export duty.
Secondly, Government has recently allowed duty free import of oilcakes and
oilmeals to augment the supply to feed mills which will benefit the dairy /
poultry in the country wherever there is shortage. In view of this, there is no
justification in continuing with export duty on Deoiled Rice Bran.
Thirdly, the price of Rice Bran / Deoiled Rice Bran affects the realisation of
farmers in West Bengal as the price paid for paddy is less due to lesser
realisation on Deoiled Rice Bran.
The export duty has badly hit the solvent extraction plants of West Bengal but
it has not benefited the dairy & poultry industry of the country in any way, so
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we request you to immediately withdraw the export duty on Deoiled Rice

Bran.
Tariff Revision for Refined Palm Oil & Other Oils
Ministry of Finance defreezed the tariff value on imported RBD Palmolein vide
Notification No. 662-Customs(N.T.) dated 31 st July, 2012. However, the tariff
value for other Oils were left unchanged. By keeping the old tariff value for
other oils has opened the floodgates and huge quantity of RBD Palm Oil has
started getting imported

into India, now since the tariff value of RBD

Palmolein is much higher.

Sr.No.
(1)
1.

2.
3.
4.
5.
6.
7.

Chapter / heading/
sub-heading /tariff item
(2)
1511 10 00
Crude Palm Oil
447 (i.e. no
change)
1511 90 10
1511 90 90
1511 10 00
1511 90 20
1511 90 90
1507 10 00

Description of goods

(3)
Crude Palm Oil

RBD Palm Oil

Others Palm Oil

Crude Palmolein
RBD Palomolein
Others Palmolein
Crude Soyabean Oil

Tariff value US $
(Per Metric Tonne)
(4)
447 (i.e. no change)

476 (i.e. no change)

462 (i.e. no change)
481 (i.e. no change)
893
483 (i.e no change)
580 (i.e no change)

Tariff value of RBD Palm Oil is freezed at US$ 476/tonne while current market
price is about US$ 840 per M.T.

The whole purpose of increasing the tariff

value on RBD Palmolein is nullified since RBD Palm Oil

is being imported

instead, thereby affecting viability of CPO import. This is hurting the capacity
utilization of the domestic Refining vegetable oil Industry, which is already
suffering from huge capacity and low utilization.
Government may consider to revise the tariff value on RBD Palm Oil and other
Oils as being done for RBD Palmolein on fortnightly basis to check the undue
advantage.

Import of Copra Cake, Palm Kernel Cake & Rice Bran at Nil Customs Duty to
Increase supply for domestic and export purpose.
Government

allowed import of Soybean meal, Groundnut oil cake/meal,

Sunflower oil cake/meal, Canola oil cake/ meal and Mustard oil cake/meal at
Nil customs duty vide Notification No. 47/2012-Customs dated 21 st August,
2012 to increase the oilcake/meal availability in the domestic market.
India is importing small quantity of Copra cake from Indonesia and Philippines
and also Palm Kernel cake from Indonesia and Malaysia and also there is
potential to import Rice Bran from the neighbouring countries like Burma,
Bangladesh and Pakistan. These three items are also raw materials for the
solvent extraction industry and their end products are Copra Meal, Palm Kernel
Meal and Rice Bran Extractions which are used in feed formulation for poultry,
cattle and aqua feeds. Inadvertently these three items are left out from the
basket of import of oilcakes.
Exim Code of these three items are
Exim Code
Commodities
2306 50 10
Oil cake and Oil cake meal, expeller variety of coconut or copra
2306 60 00
Oil cake and Oil cake meal, expeller variety of Palm Kernel
2306 20 20
Rice Bran, Raw and Boiled
2306 20 90

Kindly consider to allow import of the above items at Nil duty which will
further supplement the raw material for both solvent extraction industry and
feed industry and will increase the overall supply of

feed ingredients

for

domestic and surplus can be exported.

Need to Impose Import duty on CPO(10%) and RBD Palmolein and RBD Palm
Oil (20%) to Protect Soybean & Mustard seed Farmers
Advance Estimate of Crop Production released by Ministry of Agriculture on 24 th
September, 2012, indicated the kharif oilseeds

production would be 18.78

million tonnes compared to 20.59 million tonnes last year, as area under kharif
oilseeds has reduced to 17.33 million hectares compared to 17.86 million
hectares last year. However, the late rains in Rajasthan and North India has
4

improved the prospects for Rabi oilseeds particularly Rape-Mustard, provided

farmers are encouraged to expand area in Rapeseed-Mustard.
Good rains in Malaysia and Indonesia and since their oil palm plantation entered
into high yield cycle, leading to the record production of palm oil in the current
year.

Malaysian production of Palm Oil is likely to reach 18 million tonnes,

while Indonesian may reach record production of 27.5 million tonnes leading to
additional production of 3.2 million tonnes over the previous year. The stocks of
Palm Oil both in Malaysia and Indonesia are at the highest level of about 6.0
million tonnes and expected record crop of soybean in U.S.A. and South
America, putting a great downward

pressure on veg oil prices in the

International market and its impact is already seen in domestic prices as India
is heavily dependent on import of palm oil which can be seen from the following
table:
Average Prices of Seeds & Oils
Registered for Mumbai Market
Commodity
Seeds
Soybean seed (Indore)
Rape/Mustard(Rajasthan)
Oils
Refined Soybean Oil
Rapeseed Oil
Sunflower Oil
RBD Palmolein
Imported Oils-CIF IND US$
RBD Palmolein ($)
Crude Soya Degum Oil ($)
Crude Sunflower Oil ($)
Source: SEA Data Bank

( Price in Rs./MT.)

MSP
Rs./Quintal

July12

Aug.12

Sept.12

22nd
Oct.12

Change

2200
2500

43604
42411

43818
43921

41071
41682

31000
42470

(-) 12604
(-)
59

75081
83954
69538
62131

75504
85996
71370
61761

75257
82743
71881
58890

67200
81500
67000
52200

(-)
(-)
(-)
(-)

1036
1260
1226

1004
1276
1273

960
1280
1291

860
1200
1225

(-) 176
(-)
60
(-)
1

Soybean harvesting and sowing of Rapeseed just started. Fall in palm oil price
and its impact is quite visible. Soybean seed average price in August was Rs.
43818, now quoted at Rs.31,000 and with arrival pressure, may go down below
Rs.25,000 per tonne in few days. Farmers may not get a remunerative price for
their produce unless some immediate decision is taken by the Government to

7881
2454
2538
9931

protect and encourage them to expand area in Rapeseed during ensuing rabi
season.
The steep fall in CPO prices in International market will also affect the farmers
involved in Oil Palm cultivation. Government has allocated Rs.300 crores in the
last budget to encourage large scale cultivation of Oil Palm. Lower realization
on the FFB (Fresh Fruit Bunches) caused due to cheaper imported CPO, will
discourage the farmers from propagating further, Oil Palm cultivation.
It will be pertinent to note that the Lahari Commission in 2004 had
recommended differential duty of 10% to be made applicable between Crude
and Refined oils in order to provide level playing field for the domestic refining
industry. It is very pertinent that the Government take cognizance of this
development and impose 10% import duty on crude palm oil and 20% on RBD
Palmolein and RBD Palm oil with immediate effect to protect the domestic
farmers.
Excise Exemption on Food Grade Hexane
The Solvent Extraction Industry uses food grade hexane (2710.12) to process
oilseeds & oil bearing material to recover vegetable oil and residual product
called

oilmeal

is

either consumed locally or exported for cattle/poultry

feeds.

The industry consumes about 120,000 KL of food grade hexane per

annum. Earlier, the solvent extraction industry was exempted to pay excise
duty on food grade hexane under L6 License upto March 1994. Subsequently,
this exemption was withdrawn and excise duty of 32% was levied which was
reduced to 16 percent in July, 2004.

Currently,

14% excise duty plus 3%

education cess is levied on food grade hexane.

The solvent extraction industry is an Agro Food processing and export oriented
industry identified as thrust area by the Government of India. Oilmeals export
is earning over Rs. 8,500 crores of foreign exchange per annum facing stiff
competition in the international market could be given some support by
restoring exemption on food grade hexane from excise duty.
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It is, therefore,

suggested that food grade hexane (No. 2710.12) used in the processing of
oilseed and oil bearing material, be exempted from the purview of excise duty
or reduce excise duty to 8% from the present level of 14%.

Oilseed Development Programme

In the 2011-12 Budget,

the Honble Finance Minister had allotted

crores for expansion of area under Oil Palm cultivation.

Rs. 300

This allocation will

have a very little impact to coup up with the demand in oilseeds in order to
make the country self-sufficient in edible oil in near future. We, therefore
request the Government to allocate Rs.1,000 crores per year for next three
years to achieve visible impact on oilseeds production and productivity.
Grant General Exemption to Vegetable Oil Refining Industry from the excise
duty
At present refined vegetable oils and vanaspati is liable to nil rate of excise
duty, so the by-products of this industry are not liable for excise duty by virtue
of notification No. 89/95-C.E. dated 18 th May, 1995. But still excise authorities
at some of the places are demanding excise duty on these by-products. To
settle this controversy, we suggest that general exemption from excise duty be
granted to Refining of Vegetable oils and manufacture of vanaspati.
Grant Excise Exemption to encourage value-addition in Rice Bran Oil
Processing
Refined Rice Bran Oil is used as a premium cooking oil in countries like Japan,
Korea, China, Taiwan, Thailand & U.S.A.

Besides refined rice bran oil, a

number of value-added products including, nutraceuticals are produced from

the by-products generated during the refining of rice bran oil.
Although India is the second largest producer of paddy in the world, but the
concept of production of value added products is in the infancy stage in the
country. It needs to be encouraged through appropriate policy measures. At
present most of these products attract excise duty @ 16%. There is an urgent
need to grant general exemption from excise to Refining of Rice Bran Oil &
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Processing of its By-Products with a view to encourage value-addition in this

area.
Edible Oil & Oilseeds Exempt or Tax at Lower Rate under Proposed GST
The Empowered Committee of State Finance Ministers is in the process of
finalising the tax rates under proposed Goods and Service Tax (GST) which will
integrate most of the existing indirect taxes prevailing in the country. Edible
Oil, an essential commodity is used by all strata of population as a cooking
medium across the country.

The essential commodities are highly price

sensitive and any inflationary impact is immediately & reflected in the

Consumer Price Index apart from creating a problem of adulteration in the
country.

We understand that two tax rates structure is being contemplated

under GST i.e a lower rate for certain essential goods and standard rate for
others. The edible oil & oilseeds deserve to be classified under lower rate as
this price sensitive essential commodity affects every common mans pocket.
Moreover, edible oil being an agro based product, it impacts the lives of a large
number of farmers. We, therefore request the Government that the sensitive
essential items of mass consumption like edible oils & oilseeds should be either
exempted or taxed at lower rate under the proposed GST structure and should
be the same for all States.

(VIJAY DATA)
President
Date: 30th Oct. 2012
(File:PRE-BUDGET MEMORANDUM -2013-14 Folder)

BVM/PP