Government Bans Import of Refined Palm Oil

On Wednesday, the Indian government has imposed restrictions on the import of refined palm oils and put refined palm oil under restricted category. India imports around 15 million tonnes of edible oil per year, of which around 20% is refined oils and the rest is crude. Earlier, both refined and crude edible oils were under the free category of foreign trade resulting in surplus inflow into the country. From now on, the import of palm oil can only be done after obtaining an import license while crude oils can be shipped without any kind of licenses. The need for the restriction could be felt as the duty on both crude and refined palm oil had been lowered from 1^st January 2020.The import duties fell from 40% to 37.5% on crude palm oil and from 50% to 45% on refined palm oil, making import of refined palm oil more lucrative. This will encourage India to import more crude oils and complement domestic refiners to get business. Currently, the refining capacity in India is around 30 million tons, but only 45% of this capacity is being utilized. With the increase in import of crude palm oil due to lower import duties, stearic acid prices would soften in the domestic market as the cost of production would go down significantly. Stearic acid, a major derivative of palm oil processing finds applications in cosmetics, shampoo, soaps and detergents and a drop in its price may not reflect in the prices of the fast-moving consumer goods (FMCG) as prices of these goods remain stable through-out the year. However, manufacturers of these products that use stearic acid as a raw material would surely have better profit margin leading to overall profitability of the firm.