PETALING JAYA: India's move to raise taxes on its imports of refined palm oil products is likely to put a dent in the earnings of Malaysian and Indonesian refiners of the commodity, analysts said.
The decision, however, is neutral for crude palm oil (CPO) producers as India's CPO imports remain duty-free.
India, the world's biggest importer of palm oil, effectively doubled import taxes last Thursday when it ended a six-year freeze on the base import price of processed palm olein, increasing the cost of imports from Malaysia and Indonesia.
The country currently imports close to half its edible oil needs, and palm oil takes pole position with a 43% share of the edible oil market.
Employees fill plastic bottles with edible oil at an oil refinery plant of Adani Wilmar Ltd, a leading edible oil maker, in Mundra, 375 km from the western Indian city of Ahmedabad. The new tax policy by India is aimed at placating disgruntled refiners in India, who were doubly hit by both the low tariff and cheaper processed palm oil products from Indonesia. — Reuters
The new tax policy, which lifts the base price of refined palm oil imports to market prices from US$484 (RM1,535) per tonne, is aimed at placating disgruntled refiners in India, who were doubly hit by both the low tariff and cheaper processed palm oil products from Indonesia.
Since Indonesia slashed its export taxes on refined palm oil last October, India's imports have doubled to 1.2 million tonnes for the first eight months of this year over 2011.
CPO futures closed lower yesterday at RM2,990.
Indonesia and Malaysia, the world's top two producers of palm oil, account for 90% of global output of some 50 million tonnes.
Indonesia supplies 74% of India's palm oil requirements while Malaysia makes up the balance 26%.
Malaysia exported 1.66 million tonnes of palm oil products, or 9% of its total exports, to India last year. In the first half of the year, Malaysia shipped 1.07 million tonnes there, which was 82% more than in the same period in 2011.
CIMB Research said in a client note that the higher tax was estimated to widen the margin advantage of palm oil refiners in India to 7.73% from 3.5%.
“This will allow them to compete better with the Indonesian refiners, which we estimate enjoy a profit margin of 5% to 10% due to the favourable export tax for refined palm products in Indonesia,” it said.
The research unit also pointed out that the levies could make CPO imports more competitive versus processed palm oil, resulting in higher imports of the former to India. “Players that will benefit include all the upstream producers as this will boost demand for CPO over refined palm products from India.
“Refiners like Mewah and Wilmar's refineries in Malaysia and Indonesia could face stiffer competition from India's refiners and this could crimp their refining margins.”
Maybank IB Research reckons the situation could pressure Malaysian policymakers to revisit the current export tax structure as palm oil inventory is expected to pile up in the upcoming seasonally high production months.
“The change further dilutes the competitiveness of Malaysian refined palm oil while Indonesia's refiners' margins could be compressed (for sale to India).
“Malaysia imposes a high export duty on CPO of 23% and consequently, the bulk of its CPO production flows downstream to its refineries. However, there is an over-capacity of refineries in Malaysia, and margins are already negative for some,” it said in a client note.
The brokerage sees two options for policymakers - they could either increase the quota for duty-free CPO exports as an interim measure on top of the approximately three million tonnes awarded earlier this year, or reduce Malaysia's high export duty tax on CPO to a maximum tax rate of 10% from 23% now to mirror Indonesia's tax differential between refined and crude palm oil.
Maybank IB Research is cognisant, however, that a larger quota of duty-free CPO exports may irk refiners, while revamping Malaysia's export tax structure now could prove unpopular coming just ahead of the national polls. “After all, 39% of Malaysia's oil palm planted areas are owned by smallholders and government agencies, while the bulk of Malaysia's refining capacity are owned by the large listed entities.”
It added that as policy makers continued to deliberate, market forces are “taking their own course”, with millers in Sabah and Sarawak sharing the burden of refiners by giving them discounts in the first half of 2012.
“And effective July, we understand Wilmar (Malaysia's largest refiner with a capacity of some five million tonnes) has discontinued all forward purchases agreements in Malaysia, opting for spot purchases.
“We believe this will give Wilmar stronger bargaining position to demand for even higher discounts especially when CPO tanks (of millers) “overflow” in the coming months.
“Should this happen, purer Malaysian upstream players will suffer' from lower revenue as a result of heavy discounting (vis-vis CPO spot prices) to clear their CPO stocks.”
Tuesday, July 24, 2012
India's higher taxes on imports of refined palm oil likely to hit incomes of M'sian refiners
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Indo-China trade has failed to gain momentum
SHIMLA: Indo-China trade through Shikpkila pass of Kinnaur district has failed to gain momentum over the years despite the fact that border trade through this point was resumed following the signing of protocol for extension of border trade to Shipkila pass in September 1993.
While last year around 19 traders had crossed over to China, this year only one trader has applied following the direction of union government to obtain import export code. According to sources, this is for the first time when traders have been directed to apply for the code that would help them to import or export goods without paying custom duty and without having any ceiling on the products.
Right now individual product worth Rs 25000 only could be imported or exported. "So far only one trader from Tashigang village has applied we hope in the coming days others too would apply for the code," added the officials. According to sources, last year around 18-19 traders had crossed over to China with their goods while from China side not even a single trader entered this side. "Indian traders are allowed to go upto Shipki village of China only from there it is Chinese villagers who travelled inside China to 200-250 km to bring the goods listed by Indian traders," sources said.
In past trade through Shipki La has remained very low with import turnover remaining around Rs 10 lakh while export turnover remaining between Rs 7 to 8 lakh. With the introduction of code system officials expect business across the border to rise as goods of large value would be exchanged. This year union government has added five more items in the import list while seven new items have been added in the export list. Kinnaur district industries corporation, general manager, Sarchander Negi said that once code is obtained, traders could import or export goods without any upper limit and without paying any custom duty.
"This would make the trade more lucrative and boost the trade prospect in future as more items have been added in the import and export list," he added. Trade between India and China is conducted through Namgya Shipki-la village in Pooh sub-division of Kinnaur along the Namgya-Shipkila-Shipki Jijubu land route. Traders mostly from border villages of Kinnaur district carry their stocks on mules to China.
While Indian traders carry items like agricultural implements, blankets, copper products, clothes, textiles, cycles, coffee, tea, barley, rice, flour, dry fruit, dry and fresh vegetables, vegetable oil, gur and tobacco, they return with items like jackets, shoes, crockery, flasks, goats and Chumurthi horses. Box: Trade across the border is allowed with prior permission from June 1 to November 30.
As initial three months are consumed in completing the formalities actual trade takes places in the months of September, October and November. Traders had to get border trade pass which is issued only after Special Investigation Bureau scrutinizes the applications.
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Indian drug firms lobby against EU’s new directive
Indian drug companies are lobbying against a move by the European Commission to check the import of counterfeit drugs through a directive that comes into effect in about a year from now.
According to the Pharmaceuticals Export Promotion Council of India (Pharmexcil) lobby group, the country’s drug exports to the European Union (EU) were worth $1.93 billion (around Rs.10,769 crore) in 2010-11. If India fails to get an EU equivalence certificate by 2 July 2013, when the rule is set to go into effect, 30% of this could be affected, the lobby group said.
Industry and government officials say they don’t have the manpower or the resources to be able to comply with the new directive.
Under the EU falsified medicines directive, each shipment of active pharmaceutical ingredient (API) or drug raw materials from India should be accompanied with a written confirmation, vouching that the quality of the exports conforms to EU standards. The legislation was adopted by the EU Council in May 2011 with the objective of preventing the entry of fake drugs.
Failure to provide this “equivalence certificate” would mean loss of business for India, said D.G. Shah, secretary general of the Indian Pharmaceutical Alliance (IPA) lobby group.
“The EU initiative is protectionist and while they are citing safety and public health as reasons, it is clear that they want to protect their domestic pharmaceutical companies from competition,” he said. “We can only hope that the Indian government will respond appropriately, keeping this in mind.”
The EU and the Indian drug companies have been in conflict before. In 2008, the Netherlands seized Indian drug consignments on the ground of patent infringement, triggering a trade dispute between India and the EU. The incident had prompted the Indian government to approach the World Trade Organization (WTO).
The term “falsified medicinal product” in the European Commission’s directive is of particular concern in India.
“While the directive is pertaining to API, the word ‘falsified’ could be used broadly to apply to generic drugs made in India,” said C.M. Gulati, editor of the Monthly Index of Medical Specialities, a journal on prescription drugs available in India. “If an Indian company makes a generic version of a drug patented by a multinational pharma company, it could come under this directive and be treated as a ‘falsified’ or spurious drug and be confiscated.”
At a meeting with industry representatives on Monday, the department of pharmaceuticals (DoP) sought a response from the Drug Controller General of India (DCGI) about the feasibility of training Indian drug inspectors on EU standards.
“We have sought DCGI’s position on the matter and we are concerned by the use of ‘falsified’. We have also proposed a meeting with representatives from the commerce and health ministries on the matter. We do not want to delay this any further as our exports will be adversely affected,” said Raja Sekhar Vundru, joint secretary, DoP.
The government appears to be convinced that the Indian drug companies have a case.
“We are looking at various alternatives, including approaching WTO...,” said a commerce ministry official who didn’t want to be named.
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CTC tea export to Kenya may exceed last year’s
The country’s export of CTC tea to Kenya, itself a major producer and exporter of CTC tea, may exceed last year’s level if the present trend is any indication.
In 2011, Kenya imported from India a little more than three millon kg (mkg) valued at Rs 20.72 crore. In first six months of the current year (January-June 2012), the Kenyan import was 1.32 mkg valued at Rs 11.38 crore as compared with 1.05 mkg valued at Rs 6. 74 crore in the same period of the last year.
This is not surprising. This year Kenya has been hit by crop loss due to unfavourable weather and the shortfall in production in the first half (January to June) is estimated to be lower by 22 mkg at 127.8 mkg (149.20 mkg). The import from India it is felt might be re-exported to help Kenyan exporters keep their overseas commitments. In the past, Kenya imported from India larger quantities – more than five mkg valued at Rs 32.76 crore in 2010, for example.
Over the years, Kenyan production has been a showing downward trend – from 398 mkg in 2010 to 377 mkg in 2011.The trend so far suggests that the drop this year might be sharper. However, exports exceed domestic production – 441 mkg in 2010 and 421 mkg in 2011. The commitments to overseas buyers were kept presumably with larger imports.
India’s tea export in the first half is estimated at 43.84 mkg as compared with 45.76 mkg in the same period of previous year despite bullish global market largely due to the demand-supply gap with major tea producing countries reporting shortfall in production. The Indian tea exporters would attribute their inability to cash in on booming export market to the drop in production. However, the drop so far has been estimated at 27 mkg, roughly 2.7 per cent of the total production of about 1,000 mkg.
The real reason is the inward looking approach of our tea producers due to the lucrative domestic market. The export market has many challenges — competition, quality and the stiff standards imposed by many European countries about the use of pesticides in tea.
By comparison, the domestic market is free for all, virtually no challenge.
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Import duty on power equipment may not make much difference for domestic manufacturers
COIMBATORE: The government's decision to impose a 21% import duty on power equipment may not mean much for local manufacturers such as Bharat Heavy Electricals (BHEL). With the order inflow presenting a bigger challenge and the threat of Chinese imports fading due to the sharp depreciation of the rupee against the yuan, local makers have more serious issues to contend with than worry about cheap imports, industry observers said.
"Import duty on BTG (boiler turbine generator used in power plants) equipment is a non-issue now for BHEL and L&T (Larsen&Toubro)," analysts at Nomura Equity Research said. The government has approved a 21% import duty on power equipment (comprising 5% basic customs duty, 12% counter-veiling duty and 4% special additional duty). Earlier, equipment for mega power projects (higher than 1000 MW) were exempt from the duty, while coal fired projects of less than 1000 MW attracted a 5% customs duty.
"The order inflow in itself is a much bigger problem for the sector right now and even for the next 2-3 years," analysts said. "The sector first needs to come out of these issues and then look for other catalysts." Moreover, competition from Chinese manufacturers is already on the decline due to the sharp depreciation of the rupee. The rupee has declined 26% against the yuan in the last one year.
While public-sector orders as well as expected UMPP (ultra mega power projects) orders have a mandatory domestic manufacturing clause, the private sector would not bring major orders, observers said. The proposed duty could be prospective in nature and will not affect the already-placed orders, they said.
But even a retrospective implementation of the import duty is unlikely to benefit major players such as BHEL meaningfully since most of these projects have reached an advanced stage of construction. "Project developers are unlikely to cancel their orders to Chinese vendors at this stage," observers said.
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India's higher taxes on imports of refined palm oil likely to hit incomes of M'sian refiners
PETALING JAYA: India's move to raise taxes on its imports of refined palm oil products is likely to put a dent in the earnings of Malaysian and Indonesian refiners of the commodity, analysts said.
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Shah panel rules out ban on ore export
PANJIM: Justice M B Shah commission has pointed out that staff available with the State and Central Government agencies is not enough to control the unabated illegal mining happening in the country, including Goa.
The second interim report submitted by the Commission, copy of which is available with Herald, has also ruled out ban on the export of iron ore as it will adversely affect the economy of the States. “It is pointed out that at present staff is inadequate to control illegal mining”, the report reads.
“Unless adequate staff is appointed by the State Governments in the Mines and Mineral Department and also adequate supervisory staff is appointed with Indian Bureau of Mines (IBM), it would be absolutely difficult to control illegal mining”, it adds.
The Shah Commission has said that if the controlling machinery is weak and is understaffed, the illegal mining activities would continue unabated. The interim report has also said that considering the specific problems of Goa/Redi region, exports from there will have to be continued.
“The bilateral agreements with countries like Japan and Korea would necessitate that such exports at the existing levels may be continued”, it adds. Exports, thus, cannot be wished away. Exports of iron ore have been undertaken largely by merchant miners in the private sector. Any stoppage to exports could lead to closure of significant mining capacity as the volumes cannot be diverted to domestic use easily, says the report.
The Commission has observed that illegal mining, which runs into thousands of crores, has encouraged huge corruption at all different levels in public life, mafia in society and money power. “It is not only national loot, but also has deleterious effects on the national economy and society. This has to be stopped immediately and effectively”, it adds.
The main cause and incentive for this illegal mining of iron ore and manganese ore is the huge profit in the export market (mainly China), the report says. The prices of these have gone up by about 20 times without any corresponding benefit and increase to the public exchequer, it adds.
Source:-oheraldo.in
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Major ports may get freedom to set rates
Major ports owned by the Indian government and cargo handlers at these harbours may soon be able to set their own rates like the ports owned by the coastal states, an official panel suggested last week.
“The panel has decided to recommend that the major ports should be given the freedom to set rates based on market forces, with proper checks and balances and to amend the Major Port Trusts Act, 1963, for this purpose,” said an official who attended the Thursday meeting.
If the recommendation is approved and implemented, it will create a level playing field between the ports owned by the central and state governments.
The committee, led by B.K. Chaturvedi, member, Planning Commission, and comprising representatives from the shipping ministry and state governments, concluded its deliberations on 19 July. It will submit its recommendations to the government in the next few days. The group was established earlier this year to decide on port regulation on the basis of the draft Port Regulatory Bill, 2011.
Major ports and private firms said the move was a step in the right direction.
“TAMP (Tariff Authority for Major Ports) was set up at a time when there was no competition,” said a spokesman for the Indian Ports Association (IPA), a body representing the major ports. “There is better free-market play now in the ports sector with the opening of several new ports and private terminals and, hence, lesser chances of monopolization. So the time is right to leave tariff setting to market forces.”
“There is no need to regulate ports, whether major or non-major,” said S.S. Kulkarni, secretary general of the Indian Private Ports and Terminals Association (IPPTA), a private ports lobby. “The port privatization initiatives started by the government in 1997 have paid rich dividends. This is well manifested in the rapid rise in cargo handling. The performance and service levels offered by private ports and terminals compare favourably with the best facilities in the world. Is there, therefore, a need to regulate the sector when the market forces are driving fierce competition, both inter-port as well as intra-port? The fear of monopoly no longer exists. Any further progress in the sector can now only come through less and less legislation.”
Significantly, the panel has overturned a shipping ministry move to bring ports owned by state governments also under regulatory ambit. State governments had opposed the plan, forcing the government to set up an inter-ministerial panel to decide on port regulations. “The panel is not recommending that. It is a closed chapter now,” a second official who attended the meeting said. “We don’t want to take a retrograde step by bringing ports owned by the state governments under a regulatory regime.”
Both officials spoke on condition of anonymity because the recommendations of the panel have not been made public yet.
A shipping ministry spokesman confirmed the development. The spokesman said the 12 major ports have been seeking permission to set their own rates based on prevailing market prices to compete with ports owned by coastal states, which already enjoy the freedom.
Source:-www.livemint.com
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