Now this new measure could dampen demand for palm oil in India by raising the price of cooking oil. Ng and Ravi see this as a near-term negative for CPO prices as India was the largest palm oil importer in 2019, accounting for 19% of total imports. Yet, by increasing the costs of refining palm oil in India, refiners in Indonesia could become more competitive, considering the new export levies imposed on CPO in Indonesia.
India has raised its effective import duties on crude palm oil (CPO) effective Feb 2 in a negative for the palm oil industry. Though CGS-CIMB’s Ivy Ng and Nagulan Ravi have thus issued a “neutral” call due to the potential backlash on upstream planters, Indonesian firms with exposure to downstream refining like First Resources and Wilmar International could see slight positive.
“On an overall basis, we estimate the revision will result in the effective import duty for CPO rising to 35.75% from 30.25%. However, there is no change to the effective import duty for crude soybean oil and crude sunflower oil which remains at 38.5%,” they write in a Feb 2 broker’s report. This implies an additional US$57.70/tonne tax on CPO imports, which is likely to be passed onto consumers in India.
