Opinion

Indian Imports Hampered by Logistical Bottlenecks

Refined Soybean Oil
Refined Sunflower Oil
Soybean Meal
India
Published Aug 27, 2021
On the 24th of August, India reduced base import taxes on crude soybean oil and crude sunflower oil to 7.5% from 15% for six weeks and permitted the import of 1.2 million tonnes of soybean meal to reduce rising vegetable oil prices. India is the largest vegetable oil importer, and the current adjustments in import taxes could lead to larger import volumes for the Asian country. However, recent logistical problems could limit import volumes.



India amends import taxes

The reduction in taxes could boost soybean oil and sunflower oil imports in September. However, the increase in imports could be limited as the lower tariffs are valid until September 30, 2021. India’s sources for soybean oil and sunflower oil are Argentina, Brazil, Ukraine, and Russia. India fulfills over two-thirds of its vegetable oil demand through imports, and the country has struggled to contain surging domestic oil prices in recent months. It had cut import tax on crude palm oil on June 29. Following the reduction in taxes, crude soybean oil and sunflower oil imports will be subject to a 30.25% tax, including the 7.5% base import tariff. The Indian government could restore the higher duty structure from October, during the commencement of the summer-sown oilseeds.

Logistically, challenges could arise in securing contracts and ensuring that vessels are unloaded at Indian ports before the end of September. Oil refiners could divert ships traveling to other destinations such as China towards India to benefit from the low import duty. According to the Solvent Extractors Association of India, before the recent reduction in import tariffs, the tax on soybean oil and sunflower oil exceeded the tax on palm oil. However, following the adjustments, there is import tax parity on vegetable oils in the country.

Logistical bottlenecks arise

Indian traders are pushing to secure shipments of soybean meal, following the country permitting the import of 1.2 million tonnes of soybean meal. However, logistical problems could limit quantities to below 400K tonnes. The Indian government has stipulated that shipments should arrive before October 31, through Nhava Sheva port on the west coast and the Petrapole checkpost to the east on the Bangladesh border. According to the Solvent Extractors Association of India, securing containers for the Nhava Sheva port has proven to be challenging for Indian traders. Traders can bring soybean meal by road from Bangladesh. However, they are met with congestion at the Petrapole checkpost.


Nhava Sheva Port

Indian traders could prefer to import soybean meal from Bangladesh, Vietnam, and other Asian countries rather than from Argentina or Brazil due to the longer transit time. India has also permitted genetically modified (GM) soybean meal imports for the first time to aid the country’s poultry industry, following the recent surge in soybean meal prices, tripling in a year to a record high. Activists have opposed GM soybean meal imports as India is yet to approve the cultivation of any GM food crop in the country. In Bangladesh, soybean meal suppliers raised prices from USD 540 per tonne to USD 650 per tonne, anticipating Indian demand. In India, soybean meal prices are about USD 1,145.26 per tonne.

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