- On 24 December, India raised the import duties on crude and refined palm oil.

- The import duty on crude palm oil was increased from 2.5% to 7.5% while the import duty on refined palm oil was hiked from 10% to 15%.

- Incidentally, Indonesia has waived the export duty on CPO for the month of January 2015.

- The increase in India’s import duties on palm oil products has been speculated by the Press in the past couple of months. However, industry experts were expecting the increase to be announced in the country’s budget in February 2015.

- In spite of the hike in the import duties, the tax differential between crude and refined palm oil has not expanded.

- Local refiners were lobbying for the tax differential between imports of crude and refined palm oil to be as wide as 15-percentage points. At the new levels, the tax differential remains unchanged at 7.5-percentage points.

- Although the tax differential between crude and refined palm oil has not widened, we reckon that India’s demand could soften going forward.

- We believe that Indian buyers had probably stocked up palm oil in anticipation of the hike in import duties.

- Palm oil shipments from Malaysia to India grew 26% in the 25 days of December compared with the same period in November.

- From January to November 2014, India’s imports of Malaysian palm oil climbed by 36.8% YoY.

- India overtook China as the largest buyer of Malaysian palm oil this year. China’s imports of Malaysian palm oil fell by 22.4% YoY in the eleven months of the year on the back of the clampdown in commodity financing and slower economic growth.

- From January to November 2014, the country’s imports of global palm oil declined by 11.5% compared with the same period in 2013. In contrast, China’s soybean imports climbed by 12.3% YoY in the eleven months of the year. 

Source: AmeSecurities