India to Lower Tariff on Indonesian and Malaysian Palm Oil, CPO Export Will Increase

INDIA is expected to lower import tariff on palm oil products from Indonesia and Malaysia early next year. The policy is believed to increase palm oil products export from the two biggest palm oil producers in the world. As reported by Kontan, Sunday (16/12/2018), Head of Trade Research and Development Agency at Trade Ministry Kasan Muhri said that currently, under India-Malaysia Comprehensive Economic Cooperation Agreement (IM CECA), India has imposed highest import duty on CPO at 44% and as of 1 January 2019 it will be revised downward to maximum 40%. India will treat Indonesia all the same under ASEAN-India Free Trade Area (AIFTA) agreement so that import duty for Indonesian CPO will also be revised downward to 40%. Using regression analysis, Kasan estimated that import tariff revision by India will impact significantly on CPO import volume from Indonesia. Every 1% duty increase in India contributes to import volume decrease from Indonesia to 3,958.7 tons. Conversely, when the duty decreases 1%, import will increase 3,958.7 tons. In this case, import duty decrease from 44% to 40% in 2019 will increase export volume 190,020 ton valued at US$135 million. However, statistically, import duty increase in India doesn’t affect CPO import from Malaysia significantly. Meanwhile, according to IM CECA, duty for Refined Bleached Deodorized Palm Oil (RBDPO) from Malaysia will be revised from 54% to 45% as of 1 January 2019. While for Indonesian RBDPO, the duty will be lowered from 54% to 50%. However, as of 31 December 2019, RBDPO duty in India under AIFTA agreement will be the same as IM CECA so that the import duty will be the same at 45%. Kasan explained that an increase in RBDPO import duty in India will affect RBDPO import volume from Indonesia and Malaysia significantly. Every 1% duty increase in India decreases 2,010 tons import volume from Indonesia. In this case, duty decrease from 54% to 50% will increase Indonesian RBDPO export volume to 96.5 thousand tons valued at US$69.76 million. For Malaysia, every 1% increase in RBDPO duty in India decrease RBDPO import volume from Malaysia to 749.05 tons. In this scenario, duty decrease from 54% to 45% will increase RBDPO export volume from Malaysia to 80,900 tons valued at US$58.02 million. (Source: Kontan.co.id)