Traders use SAFTA to reroute palm oil through Bangladesh, Nepal: SEA
23 Oct 2019
The Solvent Extractors’ Association of India (SEA), the apex body of the vegetable oil trade, has called upon the government to look for ways to end indirect sourcing of palm oil and soyoil from Nepal and Bangladesh under cover of the South Asian Free Trade Agreement (SAFTA).
This will help Malaysia reroute palm oil through Bangladesh and Nepal to offset Indian government’s move to stop imports of Malaysian palm oil after Prime Minister Mahathir Mohamad’s stand against the abrogation of special status to Kashmir.
SEA has called on the government to close a loophole in the South Asian regional free-trade pact that has been used to circumvent customs duty by re-routing palm oil and soyoil imports through Nepal and Bangladesh.
“The palmolein being imported from Nepal is of Indonesian and Malaysian origin and soybean oil is of South American origin, routed through Nepal or Bangladesh ... for getting the duty exemption for such imports,” it said in a statement.
India charges 50 per cent tax on refined palm oil and 45 per cent on refined soyoil and another 10 per cent 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.
The re-routing is leading to a monthly government revenue loss of Rs50 crore ($7 million) and also hurting refiners in the north-eastern parts of India, it added.
Palm oil accounts for nearly two-thirds of India’s total edible oil imports. India buys palm oil from Indonesia and Malaysia, while soyoil is imported mainly from Argentina and Brazil. The country sources sunflower oil from Ukraine.