India's Commerce Ministry has recommended an increase in the import duty on refined palm oil from Malaysia in response to a demand by domestic refiners.

Once the Indian Finance Ministry accepts the decision, the import tax differential between crude and refined palm oil will be 10 percent, irrespective of the product's origin, an industry body said, while welcoming the move on Monday.

India buys palm oil mainly from Indonesia and Malaysia.

India cut the import duty on crude palm oil (CPO) to 40 percent from 44 percent starting this year, while for refined palm oil, the duty was slashed to 50 percent from 54 percent.

However, for RBD palm olein imports from Malaysia, the tax was reduced from 54 per cent to 45 per cent in line with the Malaysia-India Comprehensive Economic Cooperation Agreement (CECA).

This made Malaysian refined palm oil attractive to Indian importers, with RBD palm olein imports rising from 130,459 tonnes in December to 264,718 tonnes in January.

Capacity utilisation of India's palm oil refining industry "dropped to very low levels" as a result of the duty concession given to Malaysia under the bilateral trade deal, said Atul Chaturvedi, president of the Solvent Extractors’ Association of India (SEA).

The association had lobbied the Indian government to withdraw the concession, leading to an investigation into the matter by the Directorate General of Trade Remedies (DGTR), an agency under the Commerce Ministry.

The DGTR decision to restore the duty difference on refined palm oil as existed until last year "will revive the domestic palm oil refining industry," SEA said.

- Bernama