Industry body opposes move to cut import duty on edible oils

Amid reports that the Centre is considering a cut in the import duty on edible oils, an industry association has shot a letter asking the government to keep the duty structure unaltered and instead give thrust on increasing the domestic production of oilseeds.

In a representation to the food ministry, Mumbai-based Solvent Extractors Association of India (SEA) has said that the current duty structure on imported edible oils such as palm oil and soyabean oil should not be disturbed, official sources said here on Thursday.

According to reports, the government is considering to reduce duty on edible oils to bring down the domestic prices.

In its letter, the industry body has compared the prices of edible oils vis-a-vis other agricultural commodities and urged the government not to take any decision in haste.

The government should face the reality in the domestic prices of edible oils as prices of other items such as wheat and rice have also increased in the last one year, sources said.

The domestic edible oil prices have gone up by 15-20 per cent over the past one year while global prices have surged by about 75 per cent in the same period, the industry body said.

The SEA also said there was a need to raise the domestic oilseeds production as there would be no option available with the government once the import duty was slashed to zero.

The association has highlighted that the impact of global price rise has been minimised due to the duty cut and the rupee appreciation. Besides, SEA said that effective import duty on edible oils came to about 20 per cent as the government had not changed the base price.

The import duty on palm oil stands at 45 per cent and on crude soyabean oil 40 per cent, which was last revised on July 23, 2007 to check the rising domestic edible oil prices.

The government, which notifies the base price on a fortnightly basis, has not made any revision since July 2006 even as global rates of edible oils have gone up much higher. Customs duty is calculated on the base price of imported oils.

The current rate of crude palm oil (CPO) FOB Mumbai is $990 a tonne whereas the base price is $447 a tonne. The tariff value for crude soybean oil is $580 a tonne while the current rate has surged to $1,180 a tonne.

The Cabinet Committee on Prices (CCP) decided in December last year to review the custom duties on edible oil and also suggested to adjust the tariff rates. It had asked the food ministry to bring out a "strategy paper" on import of edible oils.

The Committee directed the ministry to study and include in the strategy paper ways to create a buffer stock of imported edible oils in the country.

The food ministry has been working on the strategy paper as the CCP had directed that it should be brought up at the earliest, the sources said.

The country imports palm oil from Malaysia and Argentina and soya oil from Argentina and Brazil as the domestic demand is much higher than the production of edible oils. The edible oil imports have surged 6.7 per cent to 4.7 million tonnes in 2006-07 season ending October.