Import duty cuts to help ease food prices

The govt on Friday lowered the import duty on wheat to 10% from 25%

The import duty cuts on wheat, edible oil and potato are expected to lead to a surge in their arrival from overseas markets.

The Indian edible oil industry had urged the government to maintain a duty differential of 15 per cent on crude and refined oil to protect the interests of refineries.

The government, however, lowered the import duty on crude palm oil from 12.5 per cent to 7.5 per cent and on refined oil from 20 per cent to 10 per cent, thus narrowing the duty differential to a mere 2.5 per cent.  Domestic edible oil refiners are facing a surge of imports of refined oil over the last few months, reducing their capacity utilisation to 30-40 per cent from 55-60 per cent a year ago.

“If the government was worried about inflation it could have reduced the import duty on crude palm oil. This would have kept the duty differential at 15 per cent and allowed refineries to function. The import duty cut will affect farmers’ realisation on soya bean,” said Atul Chaturvedi, president of the Solvent Extractors’ Association of India.

With imports expected to surpass all previous records at 15.5 million tonnes during 2015-16 (ending October), India will meet its 55-60 per cent its edible oil requirement mainly from Malaysia, Indonesia and Argentina.

The government on Friday also lowered the import duty on wheat to 10 per cent from 25 per cent. India’s estimated harvest in 2015-16 is 93.50 million tonnes, 7 million tonnes more than in the previous year.  

D Manikchand, managing director, Panchganga Roller Flour Mills, a Kolhapur-based flour mill, said the reduction in the import duty on wheat would benefit millers in the south as these would prefer imports.

“With a 25 per cent import duty, the landed cost of imported wheat is Rs 2,100 a quintal against the prevailing price of Rs 1,900 a quintal in the southern states and Rs 1,650 a quintal in the north. We expect at least 1 million tonnes of wheat imports, largely from Australia, this financial year,” Manikchand added. Trade sources said if the Centre had not lowered the import duty, there could have been a shortage of flour during the festival season as mills were left with little stock.

The government also lowered the import duty on potato from 30 per cent to 10 per cent because its price had spiked in the last few weeks.

Potato output has declined 9 per cent to 43.7 million tonnes in the 2015-16 crop year (July-June).

“The prevailing price in Egypt and Pakistan is so low that the government must have decided to encourage potato imports,” said a city-based potato dealer.