New Delhi, July 3 - India may impose a nominal tax on crude palm oil imports and marginally raise the levy on refined oils, top industry analyst Dorab Mistry said.
India, the world's second-biggest vegetable oils buyer after China, allowed tax-free imports of crude palm oil late last year and cut the duty on refined oils to 7.5 percent.
Local industry is seeking higher import taxes, which would also increase government revenue, but analysts say worries of weak monsoon rains and lower crop would discourage higher taxes.
"The government may think of a nominal duty on crude palm oil and some marginal increase in the duty on vegetable oils," London-based Mistry, whose forecasts are closely watched by the industry, told Reuters in an interview on Friday.
He said vegetable oil imports in the current year to October were likely to soar to a record 8.0-8.5 million tonnes from 6.3 million tonnes a year ago, while demand would rise over 10 percent to 14 million tonnes in 2008/09 and remain flat in the following year.
Vegetable oil imports in the seven months from last November rose to 5 million tonnes from 3 million tonnes in the year-ago period, while purchases last month more than doubled to 751,097 tonnes due to high demand and lower import duty.
Indian traders, seeking higher taxes to cut imports, believe Finance Minister Pranab Mukherjee may meet their demand in the budget on Monday. For a related story see:
"On the one hand, there is a demand from traders but on the other, there are concerns over poor monsoon rains," Mistry, who heads vegetable oil trading division of Indian conglomerate Godrej International, said.
India's import taxes are keenly watched by palm oil trade in Malaysia and Indonesia and soyoil sellers Brazil and Argentina.
DEMAND TO PLATEAU
Mistry said vegetable oil imports had surged as local demand rose towards the end of the economic boom.
"I believe more than 10 percent robust rise in demand in 2008/09 and lower prices have triggered imports. Now, the rise in India's demand will pause next year before going up again."
Benchmark crude palm oil prices in Malaysia, the world's second-biggest palm oil producer, hit a record 4,486 ringgit ($1,273) a tonne in March 2008 before collapsing at the height of the global financial meltdown.
Mistry said per head consumption of vegetable oil in India was estimated at 12.8 kg in 2008/09, up from 11.4 kg a year ago.
Expressing concern over forecasts that monsoon rains would be 93 percent of the long-term average, Mistry said, summer-sown oilseeds such as soybean and groundnut might be hit.
The weather office said on Thursday rainfall during the one month to July 1 was 46 percent below normal.
"Soybean and groundnut could be in danger. August rainfall is critical for soybean, especially when there are forecasts of early withdrawal of monsoon," he said.
There was no need to panic as soybean was primarily a bean seed due to less oil content, Mistry said. ($1=3.524 Malaysian Ringgit)