After palm oil, many other Malaysian exports may face restrictions from India as the Modi administration expresses anger over Malaysian PM's CAA remark.
  • Miffed by Malaysian PM's remarks on CAA, Indian govt is likely to increase restriction on imports from his country
  • India may limit imports of Petroleum crude, palm oil and aluminum wire, among other products from Malaysia
  • India, which is the largest consumer of palm oil, has already restricted its imports from Malaysia
Palm oil fruits
© Palm oil fruitsThe Indian government had kickstarted imposing restrictions by bringing limiting import of palm oil from Malaysia, thus altering the trade relationship between the world's biggest edible oil buyer - India, and the key supplier - Malaysia.
Miffed over Malaysian Prime Minister Mahathir Mohamad's criticism of India's domestic issues like CAA, the Modi government has set into motion an exercise which may bring more curbs on exports from the southeast nation.

The cabinet secretariat has already written to the Ministry of Commerce seeking "trade remedial action against restrictive trade practices of Malaysia".

Kuala Lumpur's refusal to revoke permanent resident status for controversial Islamic preacher Zakir Naik has also affected India's attitude towards the nation.

India Today TV has accessed the directive sent by the cabinet secretariat to look into the scope for enforcing restrictions on a large number of major imports from Malaysia.

This includes Petroleum crude, refined palm oil, crude palm oil, copper and aluminum wire, microprocessors and other computer and telecom products, turbojets, aluminum ingots, LNG etc.

The government had kick started imposing restrictions by bringing limiting import of palm oil from Malaysia, thus altering the trade relationship between the world's biggest edible oil buyer - India, and the key supplier - Malaysia. India had imported 4.4 million tonnes of palm oil from Malaysia in 2018-19.

The decision also has a 'Make in India' connection. The government claims that the restrictions will also boost business for Indian refiners of crude palm oil. India is one of the world's largest vegetable oil consumers with an average Indian consuming over 20 kg of vegetable oil a year.

If India goes ahead with imposing restrictions, it would create a big setback for Malaysia as all the above items make up almost $11 billion worth exports to India in 2018-19 and almost $7 billion in April 2019-20. There was a growth of 20.1 per cent in 2018-19. In contrast, India's export to Malaysia was at 6.4 billion in 2018-19 and $4 billion in April to November 2019.

The refined palm oil export was slapped a 5 per cent safeguard duty, which is now valid until March 2020. It has been decided that refined palm oil would be shifted to a restricted category requiring importers to obtain a licence from the directorate general of foreign trade which would ensure stringent scrutiny of all licences to prevent "harm on domestic industry", the note from cabinet secretariat said.

The Ministry of Electronics and Information Technology has been directed to notify technical standards for microprocessors by the end of January. In an attempt to curb unrestricted imports into India from countries like Malaysia, a mechanism for stringent enforcement of the standards is being worked out. The customs department in fact has already been asked to conduct 100 per cent inspection of all microprocessors being imported.

The secretary mines has been asked to consider establishing an import monitoring system to discourage imports of products with the potential to harm the domestic industry.

Malaysian palm oil now faces 50 per cent import tariff, due to an additional 5 per cent safeguard duty as compared to just 45 per cent on Indonesian oil.

Interestingly, India is tightening the screws on imports from China following steadfast support for Pakistan by India's neighbour.

While the focus of creating protective barriers against dumping by China has been on large products small items like mobile accessories have continued unrestricted flow into India hurting domestic manufacturers and boosting the sales of their Chinese counterparts.

These items escape notice as during the import process they are classified in the category called "others".

Minor items like unsorted waste and scrap witnessed a spurt of about 40 per cent in the recent past. The sale of items like antennas used in various sectors saw a jump of 30 per cent, in the last fiscal. These were imports which used to raise no alarms like steel or chemicals but eventually used to form $100 billion or 20 per cent of India's imports.

Now the DGFT is looking into for ways to create a licensing mechanism for 'other item' imports.

A senior ministry of commerce officials told India Today TV that a large number of items making up 25 per cent of India's imports cannot be ignored. "The country needs to know what is being imported. There needs to be a mechanism in place to set quality standards and enforcement."

Commerce minister Piyush Goyal had recently flagged the issue and said that the Indian government, like Germany, may restrict the import of products that are being brought into India under the others category.