WORLD TRADE
ORGANIZATIONG/SG/N/6/IND/13
4 June 2002
(02-3074)
Committee on Safeguards Original:  English
NOTIFICATION UNDER ARTICLE 12.1(A) OF THE
AGREEMENT ON SAFEGUARDS ON INITIATION OF
AN INVESTIGATION AND THE REASONS FOR IT
INDIA
The following communication, dated 3 June 2002, has been received from the Permanent
Mission of India.
_______________
Attached herewith is a copy of the Notice of Initiation of safeguard proceedings
(No. SG/INV/2/2002 dated 27 May 2002) issued by th e Director General (Safeguards) against imports
of Vegetable Oil (Edible Grade) into India.G/SG/N/6/IND/13
Page 2
OFFICE OF THE DIRECTOR GENERAL (SAFEGUARDS)
5th FLOOR, 'D' BLOCK, I.P. BHAWAN
NEW DELHI
NOTIFICATION
F. No. SG/INV/2/2002         Dated:  27 May 2002
Notice of Initiation of a Safeguard Investigation
{Under Rule 6 of the Customs Tariff (Identification and
Assessment of Safeguard Duty) Rules 1997}
Subject: Initiation of safeguard Investigation concerning imports of Vegetable Oil (Edible Grade)
into India
1. An application has been filed before me under rule 5 of the Customs Tariff (Identification and
Assessment of Safeguard Duty) Rules, 1997 by The Solvent Extractors' Association of India, Mumbai
for imposition of safeguard duty on imports of Vegetable Oil (Edible Grade) into India to protect
domestic producers against serious injury caused by the increased imports of Vegetable Oil (Edible
Grade) into India.  Vegetable Oil of Edible Grade includes Soyabean Oil, Ground Nut Oil, Palm Oil,Palmolein and Palm Kernel Oil, Sunflower Oil, Kardi/Safflower Oil, Coconut Oil, Rapeseed Oil
(Mustard), Rice Bran Oil, Sesame Oil, Salseed Oil,  Kokum Seed Oil and other vegetable oils of edible
grade.  It includes both crude oil as well as refined oil but excludes hydrogenated oils or vanaspati.
2. Domestic industry.  Since the vegetable oil producers in India comprises over 15,000 oil
mills, 600 solvent extraction units and 400 refining units.  The application has been filed by The
Solvent Extractors' Association of India, Mumbai on behalf of the domestic producers of Vegetable
Oil (Edible Grade) for imposition of safeguard duty on imports of Vegetable Oil (Edible Grade).  The
majority of oil mills, solvent extraction units and refining units are members of the SEAI.
3. Product involved.  The applicants have alleged serious injury caused to the domestic
producers by the increased imports of Vegetable Oil (Edible Grade) into India.  Vegetable oils are
esters of glycerol with fatty acids (such as palmitic, staric and oleic acids).  They are generally fluid
and lighter than water.  These vegetable oils are 'fixed' fats and oils i.e. they cannot easily be distilled
without decomposition, which are not volatile and which cannot be carried off by superheated steam
which decomposes and saponifies them.  Vegetable oils occur widely in nature and are found in the
cells of certain parts of plants (e.g. seeds and fruit), from which they are extracted by pressure or bymeans of solvents.  Pressing may be through hydraulic or expeller presses.  Oil may be 'crude' or
'refined/purified'.  Fixed Vegetable Oils obtained by pressure shall be considered as 'crude', if they
have undergone no processing other than decantation, centrifugation, filtration, provided that, in order
to separate the oils from solid particles only mechanic al force, such as gravity, pressure or centrifugal
force, has been employed, excluding any absorption filtering process, fractionation or any otherphysical or chemical process.  If obtained by extrac tion, an oil shall continue to be considered to be
'crude', provided it has undergone no change in colour, odour, or taste when compared with the
corresponding oil obtained by pressure.  Vegetable oils may be 'refined' or 'purified' by clarifying,
washing, filtering, decolourizing, deacidifying or deodorizing processes.  In terms of usage, vegetable
oils may be classified into 'edible oils' and 'non-edi ble oils or industrial oils'.  The present application,
however, covers only vegetable oils of edible grade.  It does not cover vegetable oils of non-edible
grade.  Vegetable oils of edible grade are used as cooking medium, for salad dressing and for making
a number of food products such as margarine, diet ary supplements, etc.  A particular oil may be
preferred for making certain specific recipes.  Ho wever, there is a high degree of inter-changeabilityG/SG/N/6/IND/13
Page 3
between various vegetable oils.  Depending upon tast e and other preferences of individual households,
different households may use different oils for almost similar cooking purposes or for making the
same recipe.  Vegetable oils are classified under the Customs Tariff as under:
Heading Description
15.07 Soyabean Oil
1507.10 Crude Oil, whether or not degummed
1507.90 Other
15.08 Groundnut Oil
1508.10 Crude Oil
1508.90 Other
15.11 Palm Oil  [includes Palmolein also]
1511.10 Crude Oil
1511.90 Other
15.12 Sunflower-seed Oil or Safflower  (Kardi) Oil
1512.11 Crude Oil
1512.19 Others
15.12 Cotton Seed Oil
1512.21 Crude Oil, whether or not gossypol has been removed
1512.29 Other
15.13 Coconut Oil
1513.11 Crude Oil
1513.19 Other
15.13 Palm Kernel or Babassu Oil
15.13.21 Crude Oil
15.13.29 Other
15.14 Rape, Colza or Mustard Oil
Low erucic acid rape or colza-oil
1514.11 Crude Oil
1514.19 Other
Others
1514.91 Crude Oil
1514.99 Other
15.15 Other fixed vegetable fats and oils
1515.50 Sesame Oil
1515.90 Others
4. Increased imports.  Vegetable Oil (Edible Grade) is imported into India mainly from
Argentina, Australia, Brazil, Canada, East Euro pe, European Union, Indonesia, Malaysia and the
United States.  Import of edible oils have increased from a mere 2.00 lakh MT in the oil-year 1992-93
to 48.3 lakh MT in the oil-year 2000-01 (November-October).  The increase in the past three years is
about 132 per cent.  The value of Imported Vegetabl e Oil (Edible Grade) during the oil year 1999-
2000 was only Re 6,733.13 crores which increased to Re 7,012.89 crores during the oil-year 2000-
2001.  Data appearing in the reputed international publication 'Oil World Annual:  2001' the quantity
of vegetable oils imported into India have registered a 3.5 times increase between 1996 and 2000, i.e.
from 15.14 lakh MT to 49.20 lakh MT.
5. Injury:  Imports of Vegetable Oil (Edible Grade) have caused/threatened to cause serious
injury to the domestic producers of Vegetable Oil (Edible Grade) as would be evident from the
following table.G/SG/N/6/IND/13
Page 4
(Lakh MT)
Year Domestic
productionImports Apparent
domestic
consumption
(ADC)Share of domestic
production in
ADC
1992-93 68.1 2.0 70.1 97%
1993-94 69.3 3.3 72.6 95%
1994-95 71.9 10.0 81.9 88%
1995-96 72.2 14.8 87.0 83%
1996-97 74.2 17.5 91.7 81%
1997-98 67.9 20.8 88.7 77%
1998-99 69.1 43.9 113.0 61%
1999-00 63.2 45.0 108.2 58%
2000-01 58.1 48.3 106.4 55%
(a) It may be observed that imports of Vegetable Oil (Edible Grade) have increased from 2 lakhMTs in 1992-93 to 48.3 MTs in 2000-01.
(b) The market size which was 70.1 lakh MT in the year 1992-93 grew continuously to reach
113.0 lakh MT in the year 1998-99.  Thereafter, the market went down marginally to 108.2 lakh MT
in 1999-00 and further to 106.4 lakh MT in 2000-01.  On the other hand, domestic production of
vegetable oils has come down from 68.1 lakh MT in 1992-93 to 58.1 lakh MT in 2000-01 – a fall of
10 lakh MT [15 per cent].
(c) While the overall market size has grown by 36.4 lakh MT between 1992-93 and 2000-01 – an
increase of about 52 per cent, the market share of domestic production has come down both in
absolute terms and relative terms.  The share of domestic industry has come down from 97 per cent in
1992-93 to a mere 55 per cent in 2000-01.  During the last four years, the share of domestic industry
has come down from 77 per cent in 1997-98 to 55 per cent in 2000-01.  The market share of domestic
industry has fallen continuously year-a fter-year throughout the last decade.
(d) The capacity utilization of domestic producer is about 25-30 per cent and has remained
stagnant during the last few years.
(e) The sales of the domestic industry has come down from 69.1 lakh MT in the year 1998-99 to
58.1 lakh MT during 2000-01.  The domestic sale prices have come down drastically.  The AnnualAverage prices of most of the edible oils at Mumbai market for the year 2000 were significantly lower
than the prices that prevailed in 1991.  While the prices of all other commodities have generally
increased during the past decade, prices of edible oils have defied the trend and have registered an
absolute fall.  Had the prices followed the wholes ale price index, the current level of prices would
have been far higher.  The Annual Average Prices  [AAP] of vegetable oils except Groundnut oil have
come down quite significantly during the last 10 years.  In fact, even the 10 year average prices  are
much higher than AAP for the year 2000.  The per un it realization of the domestic industry is far less
than what it was 10 years ago.  The import prices are far too low compared to domestic prices forcing
the domestic industry to operate at self-destructive levels of prices.
(f) The net sales realization of the Indian Edible Oil Industry came down from Re 11,243.1
crores in the year 1997-98 to Re 10,722.8 crores in 1999-2000 registering a fall of about 5 per cent.
Operating profit has come down from Re 247.5 crores in 1997-98 to Re 106.4 crores in 1999-2000 a
fall of 57 per cent.  Profit After Tax [PAT] which was Re 92.4 crores in 1995-96 declined and theG/SG/N/6/IND/13
Page 5
industry recorded a loss of Re 149.2 crores in the year 1999-2000.  Gross Fixed Assets came down
from Re 2,477.6 crores at the close of 1997-98 to Re 2,441 crores at the close of 1999-2000.
(g) Global vegetable oil prices decreased in the range of 28 per cent to 64 per cent due to excess
supply over demand.  Lower international prices dr ove the Indian domestic prices downwards causing
alarming levels of price undercutting, price depression and price suppression.  Lower domestic prices
of vegetable oils drove down the prices of oil seeds, in many cases, vegetable oil prices went below
Minimum Support Price (MSP) fixed by the Government.  Lower oil seeds prices forced farmers to
shift land under cultivation of oil seeds to other crops which resulted in less and less oil seeds
production.  Less oil-seed production resulted in less capacity utilization by the oil crushing and
extracting industry.  More than 129 vegetable oil units closed down in a short span resulting in loss of
employment for over 18,000 people.  The size of the Indian Vegetable Oil Market grew from 88.7lakh MT in 1997 to 106.4 lakh MT by 2000-01 – an increase of 20 per cent.  However, in such an
expanding market, the share of domestic industry came down from 77 per cent in 1997-98 to 55 per
cent in 2000-01.  The imports have occurred in such increasing quantities to cause serious injury to
the domestic industry.  The sales realization of the domestic industry has come down.  Industry earned
a profit after tax of Re 92.4 crores in 1995-96, but due to price undercutting by increased imports, theindustry suffered a loss of Re 149.2 crores in the year 1999-2000.  Since the domestic oil-seed prices
are ruling at or below the MSP fixed by the Government, input prices have not gone up significantly.
Therefore, the losses are solely due to the fall in sales realization, which is directly attributable to the
price undercutting caused by increased imports.
6. The applicants have requested for imposition of safeguard duty on imports of Vegetable Oil
(Edible Grade).  They have also requested for an immediate imposition of provisional safeguard duty.
7. The application has been examined and it appears that prima facie increased imports of
Vegetable Oil (Edible Grade) have caused/threatened to cause serious injury to the domesticproducers of Vegetable Oil (Edible Grade) and accordingly it has been decided to initiate an
investigation through this notice.
8. All interested parties may make their views known by 12 July 2002 to:
The Director General (Safeguards)
5
th Floor, Drum Shape Building
I.P. Bhawan, I.P. Esate
New Delhi-110002
India.
9. All known interested parties are also being addressed separately.10. Any other party to the investigation who wishes to be considered as an interested party may
submit its representation so as to reach the Director General (Safeguards) within 21 days from the
date of this notice.
(R.K. GUPTA)
Director General (Safeguards)
__________