Reduction in agri-cess for Crude Palm Oil (CPO

Context

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.

What is agri cess?

• The Agriculture Infrastructure and Development Cess (AIDC) is a tax that the government imposes on the commercial production of agricultural produce.
• The rate charged depends on the production capacity.
• The money that the government collects through this cess is used for infrastructure development in agriculture across the country.

Impact 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 currently the world’s most consumed vegetable oil.
• It is used extensively in the production of detergents, plastics, cosmetics, and biofuels.
• Top consumers of the commodity are India, China, and the European Union (EU).
• 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 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
• 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. 
• Top producers: 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.