This article first appeared in The Edge Financial Daily on March 6, 2018 - March 12, 2018

KUALA LUMPUR: India’s record hike on crude palm oil (CPO) import levy to 44% from 30% last year would do nothing to raise the price of local oilseed prices but only lift consumer prices for cooking oil made from palm oil, said commodities consultant LMC International Ltd chairman Dr James Fry.

“It is a curious and not logical tax. I am not sure why the government did it,” he said.

Last week, the Indian government raised the import tariff on palm oil to 44% from 30% and 54% from 40% for refined palm oil — the fourth time in less than six months — in a move to support farmers and encourage them to plant more oilseeds.

“However, from an Indian farmer’s point of view, you could say I might grow the seeds that compete with palm oil but the government has not changed the tariffs on soya, sunflower and rape seed oils,” he said.

Speaking on the sidelines of the 29th Annual Palm and Lauric Oils Conference and Exhibition, Fry told The Edge Financial Daily that it was very hard to see the direct benefit for Indian farmers and consumers.

“The one thing it would do is bring in less CPO, and more soyabean/sunflower oil but India is not as big a buyer in the world market of those oil as it is of palm oil. So I cannot see logically where the incentives are meant to come from to help Indian farmers because they are not competing with palm oil,” he said.

Fry said although soyoil can replace palm oil, it is more expensive and India is not a big user of soyabean oil, unlike China.

“Even in that way if they have increased soyabean oil, it won’t affect the soyabean price much which is what the farmers grow. Basically, this move in itself does not increase the soyabean, rapeseed and sunflower oil at all significantly. All it does is increase the cost of palm oil. It is an odd decision. I find it is designed to almost upset palm oil exporters who are the main losers besides the consumers in India,” he added.

Last year, India was Malaysia’s largest importer of CPO at 2.03 million tonnes, down 28.22% from 2.83 million in 2016. It was followed by the European Union (EU) which dipped 3.29% to 1.99 million from 2.06 million in 2016 while China came in third, rising 1.87% to 1.92 million from 1.88 million a year ago.

Meanwhile, on the proposal by EU Parliament to ban palm oil in biodiesel by 2020, an act dubbed by the Malaysian government as ‘crop apartheid’, Fry believes that the European Commission (EC), and Council of Ministers would become more aware of the facts, and would not go along with the Parliament’s proposal.

EU has said it wants certified sustainable oils, not just palm oil, for its feedstock and biodiesel. Fry said nearly 100% of the oils used in biodiesel are ISCC certified (International Sustainability and Carbon Certification) as per EU rules.

“In terms of EU’s own rules, the proposal to ban palm oil from biodiesel is not logical, not in line with their own laws. What they should have said (is) we want to have certified, sustainably produced palm oil, and ideally we would like it to have methane capture,” he said.

Fry said the EU’s own scientifically-based study of greenhouse gases (GHG) reduction from different sources of biodiesel, showed that palm oil achieves the biggest reduction in GHG for mills with methane capture from the palm oil mill effluent ponds.

“Instead, they said something which is not consistent, in my view, with EU’s own regulations. I think maybe they did not fully understand what the EU regulations require,” he added.

“That is a dilemma to me. I don’t know what will happen but I believe the EC and council would be more aware of the facts, and will not go along with the Parliament’s proposal because it [palm oil for biodiesel already] meets their laws.

“I think legally it can be challenged — the ban on the use of palm oil (for biodiesel) as it meets the laws,” Fry said.

However, Fry pointed out that looking ahead, the EU will be reducing the use of all vegetable oils in biodiesel not just palm oil.