How is the edible oil industry looking at GST? Where would you fit in the proposed tax rates as per the GST draft?
At present, I do not know, where would we fit. Currently, the overall tax is about 5 per cent on average across the country in various States. If it is going to be any higher than this, it will definitely lead to inflation. Our dependence on imported oil is in access of 70-75 per cent. So a higher rate will fuel inflation and secondly there is a fear of evasion if the tax rate is higher. Higher tax might encourage people to evade. And that can possibly affect ethical and serious players. So, it will be important to see what the taxation will be and what would be the mechanism to ensure that tax evasion does not happen.
Do you look at smooth sailing post GST?
The concern is other than VAT, will the other local taxes too get subsumed in GST or not. Because a major issue, we feel is the Mandi tax – Market fees, which is prevalent in many States. It ranges from 1.5-2 per cent to even 4 per cent in states like Punjab and Haryana. So, if this Mandi Tax is not going to get subsumed in GST, this will add to the burden. Mandi tax – a state subject – is one area, where the States can have their own views and end up taxing it and defeating the very purpose of the GST. The Government has to look at it seriously as it will add to the prices of the commodity. This is something, which the state council or the GST council needs to address. It certainly is a concern for the industry just like high taxation is a concern for the industry. We feel being an essential commodity, the taxation should be minimum on the essential commodities.
SEA had raised concerns regarding cheap imports of refined oil with the government. What is the status on it?
It looks like our previous experiences with the Government will continue as it is with regard to the duty differential. We have given the Government two options. The first one is inflation neutral, where we have proposed to reduce the duty on crude oil by 7.5 per cent and allow the duty on refined oils to remain what it is. This will increase the differential. And it will not affect inflation as well. The second option is to keep crude oil duty as it is and increase that on refined oils to 27.5 per cent. Either way, the difference should be minimum 15 per cent. So that our domestic refining industry is safeguarded. As of today, our capacity utilisation may not be more than 30-35 per cent or max 40 per cent. The installed capacity is roughly about 16 million tonnes. it makes sense to encourage our domestic industry. Hence, the second options appears to be more workable and advisable as we are expecting better crop this year.
Looking at the pace of oilseed sowing this kharif seasion, what is the crop outlook accordiing to you and how do you see the demand-supply scenario and the imports of oils?
Indian consumption, which is estimated at 21 million tonnes, grows at 5-6 per cent each year. We import about 15.5-16 million tonnes, which is also growing by an average of about 800,000 to 1 million tonnes per annum every year. This year, the oilseeds acreage hasn’t increased much significantly. It is largely the same as last year. But the yield is expected to be better this year as we had a drought year last year. We expect production of soyabean and groundnut to increase as compared to last year.