Centre doubles import duty on crude edible oil

Prices may rise Rs 5-6 per kg, traders see no big drop in imports

The Centre late on Friday doubled the import duties on most varieties of crude edible oil and raised them by over 15 percentage points for refined oil.

This was done in order to prop up local oilseed prices, particularly those of groundnut, soybean and sunflower, which have been ruling below their minimum support prices (MSPs) this kharif season. 

The government also increased the import duty on soybean seeds by 15 percentage points to 45 per cent.

The latest increase, which has taken import duties on edible oil to their highest level in over a decade, comes weeks before Assembly elections in Gujarat, a big producer of groundnut and cottonseed. 

Groundnut seed prices have dropped below their MSP of Rs 4,450 per quintal despite an almost 12 per cent fall in acreage this kharif season due to good carryover stocks and low demand. This is also the case with soybean, sunflower seed and cottonseed.

According to a notification released late on Friday night, the government raised the import duty on crude palm oil to 30 per cent from the earlier 15 per cent and the duty on refined palm oil was increased to 40 per cent from the earlier 25 per cent.

 

The import duty on crude soybean oil was raised to 30 per cent from the earlier 17.5 per cent and the duty on refined soybean oil was increased to 35 per cent from the earlier 20 per cent. 

Similarly, the import duties on crude mustard oil and sunflower oil along with their refined variants were also raised. The import duty on soybean seed was increased to 45 per cent from the existing 30 per cent. 

The government had in August hiked edible oil import duties, but those increases were not big enough to stop prices from crashing.

Trade sources said edible oil prices could immediately rise by Rs 5-6 per kg. However, the country might end up importing 15.5-16 million tonnes of edible oil in the 2017-18 oil marketing year that started in November, almost the same amount as the previous year. 

India imports almost 70 per cent of its edible oil needs, mainly from Malaysia and Indonesia. Soy oil is mostly imported from Argentina and Brazil. The import reliance has increased steadily from 44 per cent in 2001-02.

The local edible oil processing and crushing industry has welcomed the government move. “The price of edible oil may go up by Rs 5-6  per kg, which, in turn, will raise the price of oilseed and support farmers. However, there is unlikely to be a big fall in imports as India’s needs to feed 1.3 billion people,” said BV Mehta, executive director of the Solvent Extractors Association of India.

Davish Jain, chairman of the Soybean Processors Association of India (SOPA), said as oilseed prices fell below their MSP, the government finally saw the logic in the industry’s requests to increase import duties.

(With inputs from Rajesh Bhayani)