23.10.2019 (The Star Online) - MUMBAI: India's top vegetable oil trade body called on Tuesday for the government to close a South Asian regional free-trade pact loophole it said had been used to circumvent tax by re-routing palm oil and soyoil imports through Nepal and Bangladesh.
The Solvent Extractors' Association of India said some traders were sourcing palm oil and soyoil from Nepal and Bangladesh under the South Asian Free Trade Agreement (SAFTA), even though both rely on imports from other countries.
"The palmolein being imported from Nepal is of Indonesian and Malaysian origin and soybeanoil is of South American origin, routed through Nepal or Bangaldesh... for getting the duty exemption for such imports," it said in a statement.
India charges 50% tax on refined palm oil and 45% on refined soyoil and another 10% surcharge on the duty.
Nepal imported 54,076 tonnes of palm oil from July to August and exported 35,706 tonnes to India during the period, the trade body said, citing import data as evidence.
The re-routing is leading to a monthly government revenue loss of 500 million Indian rupees ($7 million) and also hurting refiners in the north-eastern part of India, it added.
India's trade ministry did not immediately respond to a request for comment.
Palm oil accounts for nearly two-thirds of India's total edible oil imports. India buys palm oilfrom Indonesia and Malaysia, with its soyoil mainly imported from Argentina and Brazil. It purchases sunflower oil from Ukraine. ($1 = 70.9975 Indian rupees)
Meanwhile Malaysian Prime Minister Mahathir Mohamad said on Tuesday he would not retract his criticism of New Delhi's actions in the disputed region of Kashmir even though Indian traders have urged a boycott of Malaysian palm oil.
The impasse could exacerbate what Mahathir described as a trade war between the world's second biggest producer and exporter of the commodity and its biggest buyer so far this year.
India's top vegetable oil trade body on Monday asked its members to stop buying Malaysianpalm oil after Mahathir said at the U.N. General Assembly last month that India had "invaded and occupied" Kashmir, a disputed Muslim-majority region also claimed by Pakistan.
Indian Prime Minister Narendra Modi's government removed the long-standing autonomy of India's portion of the Kashmir valley on Aug. 5, calling it an internal matter and criticising countries that have spoken out against the move.
"We speak our minds, and we don't retract or change," Mahathir told reporters outside parliament. "What we are saying is we should all abide by resolutions of the (United Nations). Otherwise, what is the use of the U.N.?"
The U.N. Security Council adopted several resolutions https://www.reuters.com/article/us-india-kashmir-china-un/china-asks-for-un-security-council-to-discuss-kashmir-this-week-diplomats-idUSKCN1V426Q in 1948 and in the 1950s on the dispute between India and Pakistan over Kashmir, including one which says a plebiscite should be held to determine the future of the region.
Mahathir said Malaysia would study the impact of the boycott called by the Mumbai-based Solvent Extractors’ Association of India and look at ways to address the issue.
New Delhi has so far refused to comment on the trade spat.
"This is not the Indian government, so we have to find out how we can communicate with these people, because trade is a two-way thing and it is bad to have what amounts to a trade war," Mahathir said.
In a separate statement, Malaysia's Primary Industries Minister Teresa Kok said the country viewed the call for a boycott with "great concern."
The underlying sentiment tied to the association's decision was understood, but it was seen as a major setback in cooperation and working relations between the two countries, she said.
"I urge (the Solvent Extractors’ Association of India) to not take such decisions unilaterally and allow both governments to resolve the current situation," Kok said.
Malaysia's exports to India were worth $10.8 billion in the fiscal year through March 31, while imports totalled $6.4 billion, according to Indian government data.
Malaysian palm oil futures slipped on Tuesday over concerns demand would fall from India.
India was Malaysia's third-largest export destination in 2018 for palm oil and palm-based products worth 6.84 billion ringgit ($1.63 billion).
Malaysia said last week it was considering raising imports of raw sugar and buffalo meat from India, in a bid to ease the trade tensions.
India, the world's biggest importer of edible oils, also buys palm oil from Indonesia, soyoilfrom Argentina and Brazil, and sunflower oil from Ukraine.