SEA writes to PM seeking hike in import duty of edible oils

It has suggested to increase import duty on crude vegetable oils from 2.5% to 10% and refined vegetable oils from 10% to 25%

Edible oil industry body SEA today said it has written to the Prime Minister demanding hike in import duty of edible oils as local oilseeds prices have fallen to historical lows due to cheaper imports.

"As a remedy to the current situation, we would like to suggest the government to increase import duty on crude vegetable oils from 2.5% to 10% and refined vegetable oils from 10% to 25%," Mumbai-based Solvent Extractors Association (SEA) said in a memorandum to the Prime Minister.

This will safeguard the interest of farmers by ensuring remunerative price for their produce in the next kharif harvest season, it said.

Stating that the "fear of fuelling inflation due to duty hike is unfounded," SEA said that now inflation is lowest in the last five years at 3.74%.

Moreover, the additional revenue generated by customs duty can be ploughed back into increasing oilseed productivity.

Due to lower global prices, India's import of vegetable oils has reached 95.3 lakh tonnes up to August 2014 and looking at shipments planned for next two months, the total import would be over 11.5 million tonnes, it added.

Global prices are lower because Malaysia has announced zero export duty on palm products for two months effective from September with an aim to reduce inventory. That apart, Indonesia too is likely to reduce export duty to zero from nine% from the current month, it said.

"This will result in increased pressure on domestic prices in coming months when Kharif oilseed crop would be marketed," SEA warned.

Currently, edible oil prices are at historical low since 2008. Local prices are also at a level where Indian oilseeds growing farmers will be in distress with a kharif harvest expected in next four to five weeks, it said.

Further, Indian vegetable oil industry has been suffering for last three years due to minimal duty difference of 7.5% between crude and refined oil and inverted duty structure by Indonesia and Malaysia, it added.

Capacity utilisation of domestic vegetable oil refining industry has been reduced to 35-40% as against 65-70% in the past, SEA said.

Besides the Prime Minister, the industry body has made presentation on this issue to Finance, Food, Agriculture and Commerce ministries.