Govt asks edible oil industry to pass tax cut benefits to retail users

The Department of Food and Public Distribution (DFPD) held a meeting with leading edible oil associations and industry stakeholders. An advisory was issued, instructing them to pass on the benefits of the reduced duty to consumers, said the Ministry of Consumer Affairs, Food & Public Distribution. 

The government had reduced the Basic Customs Duty (BCD) on crude edible oils—specifically crude sunflower oil, soybean oil, and palm oil—from 20 per cent to 10 per cent on 31 May.

 

This revision has widened the import duty differential between crude and refined edible oils from 8.75 per cent to 19.25 per cent.

 

The advisory directed all stakeholders to immediately revise the Price to Distributors (PTD) and Maximum Retail Price (MRP) in accordance with the new import duty, ensuring that cost savings are transmitted across the supply chain to end consumers.

 

PTD is the rate at which manufacturers or importers sell to distributors. It includes production costs, taxes, and distributor margins.

 

MRP is the maximum price that can be charged to consumers, encompassing all taxes and profit margins throughout the supply chain.

 

When PTD decreases, MRP is expected to be revised downward to reflect the lower import costs. 

Weekly reporting of price adjustments

Edible oil associations were advised to ensure that their members implement immediate price adjustments and share updated brand-wise MRP data with the department on a weekly basis. The DFPD also provided a standardised reporting format for revised MRP and PTD submissions.

 

“This decision follows a detailed review of the sharp rise in edible oil prices after last year’s duty hike. The increase led to significant inflationary pressure on consumers, contributing to rising food inflation,” the government statement said.

 “This adjustment (tax reduction) aims to address the escalating edible oil prices resulting from the September 2024 duty hike and concurrent increases in international market prices,” said the Ministry of Consumer Affairs, Food & Public Distribution.

 

Explaining the rationale behind the revised import duty structure, the ministry stated:

 

“A 19.25 per cent duty differential between crude and refined oils helps encourage domestic refining capacity utilisation and reduce imports of refined oils.”

Boost to domestic refining capacity

This move is expected to lower the landed cost of crude edible oils, reduce retail prices, and provide relief to consumers. It also aims to promote the utilisation of domestic refining capacity, thereby curbing the import of refined oils.

 

“The timely transmission of this benefit through the supply chain is imperative to ensure that consumers experience a corresponding decrease in retail prices,” the ministry added.

 

The wider duty gap is anticipated to discourage imports of refined palmolein and boost demand for crude edible oils, especially crude palm oil. This shift is projected to benefit the domestic refining sector by increasing reliance on locally refined products.