Cheap oil from SAFTA nations hits farmers here

KOLKATA|MUMBAI:Entry of duty-free refined edible oils from neighbouring countries of Bangladesh, Nepal and Sri Lanka under South Asian Free Trade Area (SAFTA) agreement is hurting Indian oilseed farmers and refiners, with prices of oilseed dropping 4 per cent in the last 15 days.

Around 20,000 tonnes of edible oil have already entered India from Bangladesh and industry executives say the volume will increase if the government does not intervene.

The government had increased import duty on crude palm oil (CPO) and refined palm oil to 48.4 per cent and 59.4 per cent respectively in March and that on soft oils to 38.5 per cent in June to help farmers and support domestic prices. But imports from neighbouring countries under SAFTA have thwarted that initiative, trade insiders say.


“Cheap imports through member countries are undermining the entire initiative of supporting the farmers as they have distorted domestic prices,” said Angshu Mallick, chief operating officer at Adani Wilmar. “This will in turn hurt domestic crops and farmers,” he told ET.

Solvent Extractors' Association of India (SEA) has taken up the matter with the government.

In a letter to finance secretary Hasmukh Adhia on July 5, SEA president Atul Chaturvedi said edible oils from SAFTA member countries are being sold at a discount to that imported directly from places such as Malaysia and Indonesia (palm oil), Argentina (soya oil) and Ukraine ( sunflower oil). He urged the government to address this issue by putting all edible oil products and vanaspati on the negative list of SAFTA treaty “as soon as possible”.

While the government in March raised import duty on refined palm oil to 59.4 per cent (including surcharge) from 40 per cent , refined palm oil was being imported from Bangladesh at Rs 63,000-65,000 per tonne against landed price (including duty) of Rs 71,000 per tonne from Malaysia and Indonesia, said Sandeep Bajoria, chief executive at Mumbaibased vegetable oil importer Sunvin Group. Similarly, refined soya oil was being imported from Sri Lanka at Rs 68,000 per tonne against landed price of Rs 76,000 from Argentina, he said.

India had imported around 15.5 million tonnes of edible oil in 2017. A Rabobank report said the country’s vegetable oil imports will rise to 25 million tonne in 2030 from 15.5 million tonne in 2017 due to increasing demand and stagnant supply.

India is the world’s biggest vegetable oil importer and primarily imports palm oil from Indonesia and Malaysia. More than 70 per cent of India’s edible oil demand is met from imports.

Rabobank estimates Indian vegetable oil demand to grow significantly with a CAGR of 3 per cent to exceed 34 million tonne by 2030, with the per capita consumption pegged at 24 kg in 2030, due to rising disposable income and population growth.

South Asian Free Trade Area (SAFTA), the free trade arrangement of South Asian Association for Regional Cooperation (SAARC), came into place in 2006.