Malaysia export tax unlikely to hit raw material cost: GCPL

Malaysia will cut crude palm oil (CPO) export taxes and discontinue a tax free shipment quota for the grade from January 1 2013. A Mahendran, MD, Godrej Consumer Products Ltd told CNBC-TV18 that this tax would not make a big difference to raw material cost.

"The duty is linked to a particular quarter system. It is connected to 45 days period. In that cycle, on December 15 we will know what duties would be for imports in January and that happens to be zero," he explained.

Malaysia, the world's No.2 producer seeks to snatch back market share from top producer Indonesia. It is also looking at setting export taxes for the crude grade on a monthly basis to better reflect movements in international prices.

Below is the edited transcript of his interview to CNBC-TV18

Also read: Fitch warns fiscal cliff could cost US its AAA rating

Q: Malaysia has cut the export tax on Crude palm oil to zero, what might be the impact?

A: It does not make a big difference to raw material cost. The model in which Malaysia is operating, there is no tax. The duty is linked to a particular quarter system. It is connected to 45 days period. In that cycle if you come to 15th of December then we will know what duties would be for imports in January and that happens to be zero duty.

If more rolling over or a flexible duty is there, that impact is assuming the maximum duty, only if they were to levy is 10 percent. Depending on the volumes in the quarter system one can also average it out to 5 percent export duty. However, the good news is that the duty will be zero for the month of January.

Q: We are already seeing a significant fall which should reflect in your financials in Q3 people believe. Do you expect that to extent into Q4?

A: Yes, when the total cost is concerned, it is sobering down. There is no doubt about it.

Q: How much in an average do you think the October-December quarter would have gone down, on a quarter on quarter basis, in terms of the Palm Fatty Acid Distillate (PFAD)?

A: It has sobered down definitely. It won't be much of an impact for this quarter. I will not be able to give the exact number because it will come to some sort of a lead. We don’t provide a lead. However, yes in January the duty is going to be zero from export point of view.

Q: What is the cost of palm oil as a percentage of your total raw material cost or total cost itself?

A: It is not significant. It won't be more than 15 or 20 percent of the total cost of production.