* Indonesia eyes similar tax changes in Malaysia
* India move seen positive for CPO prices
* Monsoon may pressure India on palm imports (Adds details, Indian traders' comments)
By Michael Taylor and Ratnajyoti Dutta
JAKARTA/NEW DELHI, July 20 Exports of palm oil from Indonesia, the world's biggest grower of the edible oil, are likely to drop after top consumer India effectively doubled import taxes on refined products, in a move that could also push rival Malaysia to overhaul taxes.
India, which imports more than half its annual vegetable oil consumption of about 16 million tonnes, on Thursday ended a six-year old freeze on the base import price of refined palm olein and kept the crude variety free of duty.
"The window of tax-free imports for crude palm oil has not been shut and this gives refiners ample scope to ensure domestic supplies," of refined products, said B.V. Mehta, director of industry body the Solvent Extractors' Association of India.
India's refined palm oil imports could fall by 50,000 to 70,000 tonnes a month, with crude filling the gap instead.
"Imports will favour crude palm oil after this change, but its impact will not be felt immediately as most of the contracts for next month have arrived," said a Mumbai-based trader.
Before Indonesia's duty hike, the refined grade formed about 17 percent of India's palm oil imports but its share has now risen to about 26 percent, at the expense of crude, which is mostly imported from Malaysia.
The move followed lobbying from Indian refiners after Indonesia slashed export duties for processed oil last October, as it looked to kickstart its domestic downstream industries.
New Delhi's policy response came after Indonesia's tax cut had made Indian refineries uncompetitive, said Fadhil Hasan, director of the Indonesian Palm Oil Association.
"India's response will be disadvantageous both for Indian consumers and Indonesian producers," Hasan said. "The same action will be done by Malaysia."
The Southeast Asian nation intends to reform its export duties on crude palm oil to support refiners hit by Indonesia's export tax structure, media reports have said.
India chose to remove a freeze of the base price on refined palmolein imports from $484 per tonne to align it with current global prices, the government said on Friday.
With market prices now around $1,050 per tonne, the unchanged 7.5 percent import duty will rise in dollar terms.
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 in food such as biscuits, and as biofuel.
Production in Indonesia is expected to be 23 million to 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, versus a year ago.
Crude palm oil prices could rise after India's move, while refined products in Indonesia fall, palm traders said.
"The Indonesian CPO price will eventually go higher and olein lower -- so the spread could possibly narrow," said one Jakarta trader.
The benchmark October palm oil futures contract on the Bursa Malaysia Derivatives Exchange closed Friday at 3,042 ringgit ($964.5).
Malaysian refined palm olein for October delivery was trading at a $36 premium to benchmark crude futures on Thursday.
The current spread between refined and crude palm oils could shrink to $15-20 in the next two to three months as Indonesia will still have the edge in selling the refined oil despite New Delhi's attempt to raise the import cost, an Indian trader said. ($1=3.1540 Malaysian ringgit) (Reporting by Yayat Supriatna in JAKARTA, Niluksi Koswanage in KUALA LUMPUR, Chew Yee Kiat in SINGAPORE; Editing by Clarence Fernandez)