Govt hikes import duty on edible oils by 5%

About 60% of India's annual edible oil demand of 18-19 million tonnes is met through imports, mostly from Malaysia and Indonesia

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The government on Friday raised the import duty on crude and refined edible oils by five percentage points in a bid to protect farmers' interests and provide a level-playing field to domestic oilseed processors.

However, industry associations were not satisfied and wanted even higher duties.

According to a notification issued by the Central Board of Excise and Customs, customs or import duty on edible oil in all categories has been increased by five per cent. Duty on crude edible oil has been increased from 7.5 per cent to 12.5 per cent and on refined edible oil from 15 per cent to 20 per cent.

The Solvent Extractors' Association (SEA) said the marginal increase in import duty of edible oils was not "enough" to curb cheap imports, and would not benefit farmers and local refiners to a great extent.

SEA executive director B V Mehta said: "It is a welcome step, but not enough. The industry demanded substantial hike in duty of crude edible oil to 25 per cent and refined oil to 45 per cent, to support farmers. We wanted duty difference between crude and refined edible oils to increase so that value addition takes place in India. With marginal hike in duty, imported refined edible oil will increase and disturb the local refiners."

The duty hike follows a review of the situation by revenue secretary Hasmukh Adhia on Wednesday after the ministries of agriculture and food moved a proposal to raise import duty on edible oils.

In a letter to finance minister Arun Jaitley earlier this week, senior Congress leader Ahmed Patel had also made a strong pitch for increasing the import duty on edible oils.

According to industry estimates, India's overall edible imports are likely to increase to 14 million tonnes in the 2014-15 oil year (November to October) from 11.6 million tonnes in the previous year.

Already, 11.56 million tonnes of edible oil has been imported in the November-August period of this year.

About 60 per cent of India's annual edible oil demand of 18-19 million tonnes is met through imports, mostly from Malaysia and Indonesia.

The move is consistent with government's plan to spend $1.5 billion over three years to help farmers grow oil palm trees. Government is considering directly purchasing oilseeds from farmers and boosting state support for rapeseed, soybeans and peanuts.

"Hike in customs duty on edible oils should make domestic procurement more attractive and should help indigenous production," said Saloni Roy, Senior Director, Deloitte in India.