* Indonesia eyes similar tax changes in Malaysia
* India move seen positive for CPO prices
* Monsoon may pressure India's hand on palm imports
JAKARTA, July 20 Indonesia, the world's biggest
palm oil grower, is likely to see a drop in exports after top
consumer India effectively doubled import taxes on refined
products of the edible oil, in a move that could also push rival
Malaysia to overhaul its taxes.
India, which imports more than half of its total vegetable
oil consumption of about 16 million tonnes per year, ended a
six-year old freeze on the base import price of refined palm
olein on Thursday.
The move followed lobbying from Indian refiners after
Indonesia slashed export duties for processed oil last October,
as it looked to kick-start its domestic downstream industries.
"India's response will be disadvantageous both for Indian
consumers and Indonesian producers," said Fadhil Hasan,
executive director at the Indonesian Palm Oil Association.
Hasan said New Delhi's policy response came after
Indonesia's tax cut had made Indian refineries uncompetitive.
"The same action will be done by Malaysia," he added.
Media reports in Malaysia have already indicated that the
Southeast Asian nation intends to reform its crude palm oil
(CPO) export duties to support refiners affected by Indonesia's
export tax structure.
Malaysia and Indonesia account for about 90 percent of
global palm oil output of around 50 million tonnes
Palm oil, the world's most traded and consumed edible oil,
is used mainly as an ingredient in food such as biscuits and ice
cream, or as a biofuel.
Production in Indonesia is expected to be 23-25 million
tonnes this year, with India, China and Europe the main buyers.
"The change could be better for Malaysian CPO exporters
because India now will buy more CPO (for refining) and Indonesia
has high duty so India will look to Malaysia," said a
Singapore-based trader with a foreign commodities house.
A Reuters survey of 30 firms operating in Indonesia - from
the world's biggest listed palm oil firm Wilmar to
conglomerate Unilever - shows Jakarta's tax change has
prompted plans to nearly double refining capacity to 43 million
tonnes of palm oil at a cost of more than $2.5 billion .
The Indonesian policy change nearly doubled India's refined
palm olein imports to 1.2 million tonnes for the first eight
months of the current year from November in comparison with the
Palm traders said that crude palm oil prices could rise
after India's move, while refined products in Indonesia fall.
"The Indonesian CPO price will eventually go higher and
olein lower - so the spread could possibly narrow," said one
At 0358 GMT, the benchmark October palm oil futures contract
on the Bursa Malaysia Derivatives Exchange was steady
at 3,045 Malaysian ringgit ($970).
Malaysian refined palm olein for October delivery was
trading at a $36 premium to the benchmark crude palm oil futures
A second trader with an Indonesian refiner, which ships palm
oil to India, said he did not expect Indonesia to change its
policy or react to India's tax shift.
"We need to wait for the dust to settle down," he added.
"There will be a slight drop in Indian demand for refined palm
oil in the short term.
"But lets not forget India has a huge population (and) the
monsoon is not exactly great at this point."
($1 = 3.1540 Malaysian ringgits)
(Reporting by Yayat Supriatna and Michael Taylor in JAKARTA,
Niluksi Koswanage in KUALA LUMPUR, Chew Yee Kiat in SINGAPORE;
Editing by Ed Davies)