The government has reduced customs duties on crude and refined palm, soybean and sunflower oils from September 24, a move aimed at lowering import costs and easing pressure on domestic edible oil prices.
The basic customs duty (BCD) on crude soybean and crude palm oil has been reduced from 10% to 5%. The duty on refined soybean and palm oils has also been cut to 27.5% from 32.5%.
For sunflower oil, the government has completely removed the 10% BCD on crude imports. The duty on refined sunflower oil has been lowered by 10 percentage points to 22.5% from 32.5%.
The duty reductions are expected to bring down the landed cost of imported edible oils, which could eventually translate into lower prices for consumers. The impact, however, will also depend on international edible oil prices, freight rates and the rupee's exchange rate.
India imports around 60% of its edible oil requirements, making domestic prices sensitive to developments in the global market.
Advisory to Industry for Consumer Benefit
The Government has also issued an advisory to edible oil associations and industry stakeholders to ensure that the full benefit arising from the reduction in import duty is passed on to consumers.
Industry stakeholders have been requested to immediately revise their Price to Distributors (PTD) and Maximum Retail Price (MRP) in accordance with the reduction in landed costs. Edible oil associations have also been requested to advise their members to implement the corresponding price reductions without delay.
The Government will continue to monitor developments in international edible oil markets and domestic prices and will take appropriate measures, as necessary, to safeguard the interests of consumers while maintaining a balanced policy environment for farmers and the domestic edible oil industry.
The edible oil industry has welcomed the reduction, with the Indian Vegetable Oil Producers' Association (IVPA) expecting cooking oil prices at the retail level to decline following the duty cuts.
The move comes amid continued concerns over food inflation, with edible oils being an important component of household food expenditure. Lower import duties could provide some relief by reducing the cost of imported crude and refined oils.
SEA calls it a timely and balanced intervention
The Solvent Extractors' Association of India (SEA) has welcomed the decision and called it a timely and balanced intervention. SEA President Sanjeev Asthana said, “The present duty adjustment needs to be viewed in the context of the approximately 25% increase in international edible oil prices and a 12-15% increase in domestic prices over the past year, along with the approaching festive season. The Consumer Price Index jumped to 4.8%, while food inflation has risen to 5.95% from 5.52% a month before, which is also a concern for the Government. The immediate objective is to moderate the burden on consumers, while retaining the duty differential between crude and refined oils, which ensures that the domestic refining industry continues to have an important role in the value chain.”
The association also expects the measure to have a bearing on the emerging issue of refined edible oil imports into India from Nepal under the existing bilateral trade framework. Dr. B. V. Mehta, ED, SEA, said, “Without any change to the bilateral trade agreement between India & Nepal, a lower domestic import duty could reduce the arbitrage advantage associated with such imports from Nepal and thereby moderate the incentive for large-scale inflows.”