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NEWS ADMIN

Mahamad Rodzi Abdul Ghani

DATE

27/04/2001

NEWS PROVIDER

Mahamad Rodzi Abdul Ghani

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NULL

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HEADLINE

MALAYSIA PALM OIL MISSION TO INDIA HITS SNAG
MALAYSIA PALM OIL MISSION TO INDIA HITS SNAG

KUALA LUMPUR, April 26 (Reuters) - India's move to scrap duty benefitsfor ailing vanaspati firms importing crude palm oil has frustratedMalaysia's bid to persuade New Delhi to cut edible oil import duties,industry sources said on Thursday.This was a second blow in less than a month to Malaysia, the world'slargest palm oil producer, after its much publicised project to burn up to400,000 tonnes of crude palm oil this year to support prices turned out tobe a disappointment.Indian Finance Minister Yashwant Sinha told parliament on Wednesday hewould end the 55 percent concessional duty for financially troubledvanaspati units announced on February 28 in the 2001/02 federal budget.Vanaspati is hydrogenated vegetable oil.The move surprised the Malaysian market because it was announced justafter Primary Industries Minister Lim Keng Yaik and his Indonesiancounterpart, Trade and Industry Minister Luhut Pandjaitan, ended a visitto India where they had asked New Delhi to cut the edible oil import dutyto 45 percent.All vanaspati makers will now pay a duty of 75 percent."This means Mr. Lim's visit had absolutely no effect," said one traderin Kuala Lumpur.Malaysia and Indonesia, traditionally arch rivals, have agreed to forma world palm oil association to help lift prices and work together topromote the oil.During the visit to India, Lim offered New Delhi a $1.8 billion railwayproject, hoping the country would continue to buy its palm oil.Pandjaitan said Indonesia, the world's second largest producer, wouldconsider importing wheat from India.Both ministers are now visiting China to lobby for better access forpalm oil.

MAJOR EMBARRASSMENTTrade sources in India said there was only one vanaspati firm thatenjoyed the concession, which has meant the decision would have littleimpact on the world's largest edible oil importer.But it was a major embarrassment for Malaysia."India has to safeguard their own interest. They can't take care ofanother country's interest at the expense of theirs," said the KualaLumpur-based trader.India was Malaysia's main palm oil buyer in 2000, taking 2.03 milliontonnes.In the February budget, India raised the import duty on crude edibleoils to a uniform rate of 75 percent from 35-55 percent in order toprotect the industry.The duty on refined edible oil was increased to 85 percent from a rangeof 45-65 percent. The duty on soybean oil remained unchanged at 45 percentdue to India's commitment to the World Trade Organisation.“With Indian soyoil imports, around 250,000 tonnes of soyoil werelikely to arrive in the country in the next 45 days as the dutydifferential was expected to boost soyoil imports.” Said dealers in Indiaon Thursday.In Malaysia, traders said the palm oil market was now focusing on thestiff competition from soyoil, which has been flooding the global marketdue to strong South American harvests, and that Kuala Lumpur wasabandoning the plan to burn palm oil to lower stocks.Malaysia earlier said state utility firm Tenaga Nasional would eachmonth burn 50,000 tonnes of crude palm oil mixed with medium fuel oil.The government said it was sticking to its plan to use up to 400,000tonnes of the oil this year, but added it would find other industries thatcan use crude palm oil because most of Tenaga's power stations had beenchanged into gas firing.At the close prices on Thursday, benchmark third-month July futureswere unchanged at 768 ringgit ($202.10) a tonne.