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 Palm refineries to be destroyed if duty differential is not rectified: Atul Chaturvedi

20.03.2019 (Financial Express) - Palm oil emerged as a flashpoint in a potential trade war between the European Union and some of the world’s largest palm oil producing countries after the EU imposed stricter limits on how the palm oil can be used in green fuels.

Atul Chaturvedi, president, Solvent Extractors Association of India (SEA) has been stating that increase in import of RBD palmolein is hurting domestic industry. The association has approached finance minister Arun Jaitley seeking solutions on this issue. In an interview with FE, Chaturvedi shares his concerns on several issues related to the industry. Excerpts…

There has been a sharp increase in import of RBD palmolein. What impact do you see on the industry?
Our worst fears of increase in palmolein imports from Malaysia on the back of lower import duty have come true. It is a matter of great and serious concern that palmolein imports have skyrocketed from 1,30,459 tonne in December to a whopping 241,101 tonne in February. The duty difference of mere 5% between CPO and palmolein is simply unsustainable for our palm refiners.

If this aberration is not rectified, our palm refineries would be destroyed and ‘Make in India’ would remain a pipe dream.The industry is demanding minimum duty difference of 10% between CPO and RBD palmolein as was prevailing before January 1, 2019. Needless to mention,without a duty difference of 10%, our refineries would be elbowed out of business resulting in huge loss of employment and increase in non-performing assets. We are sure, our proactive and action oriented government would not allow this situation to go out of hand.

What is your take on the FTA agreements? Is there enough communication with the stakeholders before such agreements are negotiated?
Each country protects its own industries when negotiating trade agreements with other countries or trading blocks. When these negotiations are held, it is imperative that government negotiators should take all relevant stakeholders into confidence to avoid pitfalls at a later date.

Needless to say, domain knowledge of the stakeholders needs to be tapped as is done by other countries when they engage in trade negotiations. We understand the agreement on trade in goods under the Framework Agreement on Comprehensive Economic Cooperation between the Republic of India and the Association of Southeast Asian Nations (Asean agreement) and Regional Comprehensive Economic Cooperation (RCEC) between India and Malaysia will expire on December 31, 2019.

We would earnestly request the Indian negotiators to consult SEA in the negotiations on vegetable oil sector. This would ensure that the current aberration of duty differential is avoided. We would be suitably representing and flagging this to all concerned ministries of GOI.

A trade war is happening between the European Union (EU) and palm-producer countries. Do you see this affecting market sentiment?
Palm oil emerged as a flashpoint in a potential trade war between the European Union and some of the world’s largest palm oil producing countries after the EU imposed stricter limits on how the palm oil can be used in green fuels. This news has disturbed the market sentiment and palm oil prices are looking wobbly.

The European Commission has restricted the types of biofuels from palm oil that may be counted toward the EU’s renewable-energy goals and introduced a certification system. Indonesia and Malaysia, which supply 85 % of the palm oil, have warned that they are ready to retaliate against what they see as ‘discriminatory’ rules.

Green NGOs have constantly attacked palm producers, either motivated by real concern about environmental damage or influenced by lobbyists funded by competitors of palm industry. These NGOs are making life miserable for farmers with small holdings in Indonesia and Malaysia and can create serious long term damage to the economy of these nations. It would be interesting to watch the reactions of palm producing countries before the damage becomes permanent.

My sincere advice to our Indonesian and Malaysian friends is to seriously promote palm in Indian sub-continent as we are a growing market, capable of absorbing additional quantities. During last five/six years, palm oil consumption has plateaued in India and all the incremental growth has been captured by other oils.

You recently met Teresa Kok, Malaysia’s minister of primary industries? What were the issues that were discussed?
On the side lines of POC 2019 in Kuala Lumpur, Malaysia, I led 10-member SEA delegation and had very fruitful meeting with YB Puan Teresa Kok Suh Sim, Malaysia’s minister of primary industries and discussed wide range of subjects including close co-operation between MSPO and IPOS for promoting usage of sustainable palm oil and possibility of MoU between SEA & MPOB/MPOCC .

Joint promotion of palm should go a long way in improving consumer perception of palm oil. We also suggested, that Malaysia should maintain nil export duty on CPO to maintain export volumes. The minister positively responded to our various suggestions and also our invitation to grace SEA AGM and Globoil India 2019, to be held on September 25-27, 2019 at Mumbai.

There has been a record rape- and mustard-seed crop. Is the association seeking export of mustard oil in bulk?
The efforts of SEA in promoting and giving required thrust to mustard has started to bear fruit, if this year’s expected production is any indication. According to information available, we are likely to harvest the biggest ever crop of mustard in our country.

During the last week of February, SEA-MOPA jointly conducted rape and mustard seed survey and provisionally estimated 85 lakh tonne production for the current season, up by 19% from the last year. The recent rain in northern India may delay the harvest. The farmers have done the job of raising the production of mustard. Now, it is the duty of the government to act timely and ensure prices are not allowed to fall below MSP as that would disappoint our farming community. Agencies like NAFED, who are authorised to ensure MSP prices , should gear up and be ready to ensure prices do not fall. The government has allowed exports of all edible oils in bulk except mustard oil. In view of the bumper mustard crop, its oil should be allowed to be exported in bulk as that would help in stabilising prices. We are accordingly requesting the government to allow export of mustard oil in bulk.