India should have policy stability on edible oil import tariffs, says paper

India should maintain an import duty differential of a minimum of 7.5–10 per cent between crude and refined edible oils to protect the domestic processing sector and have a long-term three-to-five-year policy plan on import tariffs. 

This is because quick and sudden changes in import duties on edible oil trigger short-term volatility in wholesale and retail prices, impacting everyone in the value chain, a recent research paper titled Tariff Volatility and Stakeholder Dynamics in India’s Edible Oil Sector said.

 

The paper, published jointly by the Centre for Economic Studies and Planning (CESP), School of Social Sciences at Jawaharlal Nehru University (JNU), VeK Policy Advisory and Research, and the Associated Chambers of Commerce and Industry of India (Assocham), said that over the past decade, import duties on edible oils have displayed exceptional volatility.

   

“Between 2011 and 2021, tariffs on crude palm oil, refined palmolein, soybean oil, and sunflower oil were revised more than 25 times, ranging from near zero during inflationary phases to over 50–70 per cent in protectionist periods,” the paper said.

 

At present, the effective import duty on crude palm oil is around 27.5 per cent, while that on refined palm olein and palm oil is around 35.75 per cent, thereby constituting a duty differential of 8.25 per cent.

 

The research used import duties on palm oil as the reference point, as it constitutes almost 60 per cent of India’s annual edible oil imports.

 

The paper said that not only should there be a medium-term policy framework on edible oil import duties, but it should also define clear revision triggers (for example, international price thresholds and domestic inflation limits), and there should be advance notice of 30–60 days for all revisions.

 

The paper also advocated a tariff review committee for cross-ministerial coordination (finance, consumer affairs, commerce, and agriculture).

 

It said that if the following measures are adopted and there is predictability in import tariffs, then it can lead to enhanced price stability and inflation control, strengthen consumer welfare through timely pass-through, and build trade resilience against external shocks, among other things.