[The Jakarta Globe] The volume of crude palm oil exports to India is expected to rise by 10 percent next year, thanks to the Asean-India Free Trade Agreement, according to a commerce promotion body.
Under the deal, which is due to be signed at this week’s Asean Economic Ministerial Meeting in Bangkok, India is required to gradually cut its import duty on CPO between 2010 and 2019, from 80 percent at present to 37.5 percent. In the case of refined palm oil, the tariff is to be cut from 90 percent to 45 percent.
Derom Bangun, vice president of the Indonesian Palm Oil Board, said that lower import duties would give Indonesia a chance to significantly grow its CPO exports to India as palm oil became more competitive with other vegetable oils, like soybean oil.
“Our export volume to India may increase next year by about 10 percent over the average if India reduces its import duty on CPO to a maximum of 37.5 percent,” Derom said on the sidelines of a roundtable on sustainable palm oil production on Tuesday.
India is one of Indonesia’s principal markets for CPO, along with China, with some 30 percent of the country’s 12 million tons of exported CPO being shipped to the subcontinent last year.
India’s demand for food oils amounts to some 12 million tons annually. With a maximum annual production of only six million tons, it is forced to get the remainder from abroad.
“They import between 6 million and 6.5 million tons of food oils a year, consisting of soybean, rapeseed and palm oils,” Derom said. On average, he added, India imported about five million tons of CPO per year, mostly from Indonesia and Malaysia.
“To date, India has been strong in protecting their home market from fluctuations in food oil prices by imposing high import duties at harvest time,” Derom said. “If they gradually reduce their duties on CPO between 2010 and 2019, this will enable our CPO to compete with soybean oil.”
Derom also said CPO prices had started to rise in mid-July. The commodity at Belawan harbor in North Sumatra stood at Rp 6,479 ($65 cents) a kilogram on July 24, he said, but this had increased to Rp 7,438 a kg on Monday.
“Prices are ideal at present,” he said. “Given the current price at Belawan, the price in Rotterdam will range between $700 and $750 a ton. We don’t want to go back to widely fluctuating prices, at was the case in 2008.”
However, Derom warned that with drought likely to be on the horizon as a result of El Nino, the CPO price in Rotterdam could hit $800 a ton over the coming months.
The nation is expected to produce 20.3 million tons of palm oil this year, up from 19 million tons last year.
Of this year’s production, some seven million tons will be used to supply the domestic market, mostly for cooking oil, while the remaining 12 million tons will be exported.
Indonesia’s exports to India have soared from $2.1 billion in 2004 to $7.06 billion last year. The country’s imports from India, meanwhile, rose from $1.05 billion in 2004 to $2.51 billion in 2008, meaning that Indonesia’s $1.05 billion trade surplus with the country in 2004 rose to $4.55 billion last year. []
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