To keep prices of essential commodities under check ahead of the festival season, the Centre on Friday lowered the import duty on wheat to 10 per cent from 25 per cent at present, while that on crude and refined palm oil was brought down by five percentage points each to 7.5 per cent and 10 per cent, respectively.
The import duty on potatoes, too, was brought down to 10 per cent from 30 per cent before. The duty on palm oil has been lowered despite the Centre expecting kharif oilseeds production to rise 40 per cent, raising doubts about the estimates.
Business Standard had reported on September 10 that the Centre was mulling such a move.
Ironically, the import duty on wheat has been cut despite the fact that India harvested 93.50 million tonnes (mt) of wheat in 2015-16, which is 7 mt more than the previous year's. Trade sources said if the Centre had not lowered the import duty, there could have been acute shortage of wheat flour during the coming festival season as flour mills were left with little stock.
During the October-March period, most flour mills in India relied on government stocks to keep their pipelines healthy, but with the government's own stock being just enough to meet the requirement for the public distribution system (PDS), the flour mills had to depend on imported wheat to keep their mills running.
India's wheat stocks, as on September 1, was 24 mt, while 17 mt was required for PDS till March. The stocks had fallen as wheat procurement by state agencies was to the tune of 22.9 mt, much lower than the 28 mt anticipated.
This left it with just 6 mt of stocks at the end of the season, which was less than the buffer and strategic reserves.
Officials said wheat prices in the open market would soften by Rs 100-150 per quintal because of the latest decision. At present, wheat in south India was being quoted at Rs 2,050 a quintal, while that in the northern parts of the country was selling at Rs 1,800 a quintal.
Already, private traders had imported 1.5-2 mt of wheat before the duty was lowered, but now the total imports would go up to 3-5 mt.
Hailing the decision, Roller Flour Millers Federation of India's secretary, Veena Sharma, said: "This will improve the supply and check price rise."
According to data from the Union consumer affairs ministry, wheat prices in the retail markets of many cities across the country have risen Rs 1-2 a kg in the past two months, while wheat flour rates have moved up by Rs 2-3 a kg.
The Centre in June had extended the 25 per cent import duty on wheat for an unspecified period, but since then, prices have only moved upwards, compelling it to have a relook on the duties.
Concerned over rising retail prices amid a production shortfall, the government reduced the import duty on potatoes to improve domestic availability. According to official data, potato output has declined nine per cent to 43.7 mt in the 2015-16 crop year (July-June) compared with 48 mt last year.
In case of edible oil, officials said the retail price of edible oil has shown a rising trend in the past few months because of a surge in global markets.
The landed price of crude palm oil in Mumbai between August 2 and September 2 has risen 45-52 per cent, while that of refined palm oil has gone up by 37-40 per cent. Imported soy oil rates have moved up by 16 per cent during this period.
In the domestic market, packaged soy oil rates have increased Rs 5-7 a kg in the past two months, while that of packaged groundnut oil has become costlier by Rs 5-10 a kg. Packaged palm oil and mustard oil, too, has become dearer by Rs 5-15 a kg during this period in most cities across the country.
Edible oil industry body, Solvent Extractors' Association (SEA) opposed the import duty cut on refined palm oil.
"Edible oil is not contributing to inflation. However, if the government was so much concerned, it should have reduced import duty only on crude palm oil and not refined palm oil," said B V Mehta, executive director of SEA.
He said higher duty difference between crude and refined palm oil would have encouraged domestic refining.
India is heavily dependent on import of cooking oils and is all set to import A record 15 mt in the current 2015-16 oil year ending October.