Reduction in agri-cess for Crude Palm Oil (CPO)

In News 

• Recently, the government has reduced the Agri-cess on crude palm oil (CPO) from 7.5 per cent to 5 per cent after taking into account agri development cess and social welfare cess.

Implications of the move

• The reduction in the tax, known as the Agriculture Infrastructure and Development Cess (AIDC), will widen the gap between the CPO and refined palm oil import duties, effectively making it cheaper for Indian refiners to import CPO.
  • After the reduction in AIDC, the import tax difference between CPO and refined palm oil would widen to 8.25%
• It aims to stop any further rise in prices of domestic edible oils, due to the rise in the price of edible oil globally.
• This measure is expected to curtail any unfair practices like hoarding, black marketing etc. of edible oils and oilseeds in the market which may lead to any increase in the prices of edible oils.
• This reduction will help Indian refiners, but the government needs to further increase the difference to 11 per cent in order to encourage local refining.

About Palm Oil

• It’s an edible vegetable oil that comes from the fruit of oil palm trees, having the scientific name  Elaeis guineensis. 
• Palm oil is an incredibly efficient crop, producing more oil per land area than any other equivalent vegetable oil crop fulfilling 35% of the world’s vegetable oil demand on just 10% of the land. 
• Palm oil is a major driver of deforestation of some of the world’s most biodiverse forests, destroying the habitat of already endangered species like the Orangutan, pygmy elephant and Sumatran rhino.
• Two types of oil can be produced, crude palm oil comes and palm kernel oil, of which crude has more demand. 
• Palm oil is an extremely versatile oil that has many different properties and is present in nearly 50 per cent of packages. 
• India imports around 60 per cent of its consumption of edible oils, and Palm oils (Crude + Refined) constitutes around 60 per cent of the imports of edible oils. 
• India has enormous potential for the cultivation of oil palm and the production of CPO.
  • At present only 3.70 lakh hectares is under oil palm cultivation. Oil palm produces 10 to 46 times more oil per hectare compared to other oilseed crops and has a yield of around 4 tons of oil per ha
• The country imports palm oil mainly from top producers Indonesia and Malaysia, while other oils, such as soy and sunflower, come from Argentina, Brazil, Ukraine and Russia.

Related Initiatives 

• National Mission on Edible Oils – Oil Palm (NMEO-OP): It is a new Centrally Sponsored Scheme with a special focus on the Northeast region and the Andaman and Nicobar Islands.  

• The Mission hopes to increase oil palm acreage by an additional 6.5 lakh hectares by 2025-26 and grow production of crude palm oil to 11.2 lakh tonnes by 2025-26 and up to 28 lakh tonnes by 2029-30.

• This is the first time the Centre will give oil palm farmers a price assurance, with industry mandated to pay the viability gap funding of 14.3% of crude palm oil prices. 

• The proposed scheme will subsume the current National Food Security Mission-Oil Palm programme.

• The scheme will immensely benefit the oil palm farmers, increase capital investment, create employment generation, shall reduce the import dependence and also increase the income of the farmers.

Source:IE