New Delhi: India has announced a 20 percentage point increase in the basic import tax on both crude and refined edible oils, the government said on Friday. This move aims to safeguard domestic farmers who are struggling with lower oilseed prices. As the world's largest importer of edible oils, India is taking this step to support its agricultural sector and ensure fair pricing for its farmers.
This decision is likely to drive up the prices of edible oils which could lead to a decrease in demand and a reduction in imports of palm oil, soyoil, and sunflower oil. Following the announcement of the tax increase, soyoil prices on the Chicago Board of Trade continued to decline, dropping by more than 2 per cent.
New Delhi announced on Friday that a 20 per cent basic customs duty will be applied to crude palm oil, crude soyoil, and crude sunflower oil, starting from September 14, according to the official notification.
It will effectively increase the total import duty on the three oils to 27.5% from 5.5% as they are also subject to India's Agriculture Infrastructure and Development Cess and Social Welfare Surcharge. Imports of refined palm oil, refined soyoil and refined sunflower oil will attract 35.75% import duty against the earlier duty of 13.75%.
Reuters reported in late August that India was considering an increase in import taxes on vegetable oils to help soybean growers ahead of regional elections due in Maharashtra later this year. "After a long time, the government has been attempting to balance the interests of both consumers and farmers," said Sandeep Bajoria, CEO of Sunvin Group, a vegetable oil brokerage.
The move has increased the likelihood of farmers receiving the minimum support price set by the government for their soybean and rapeseed harvests, he said. Domestic soybean prices are around 4,600 rupees ($54.84) per 100 kg, lower than the state-fixed support price of 4,892 rupees.
India meets more than 70% of its vegetable oil demand through imports. It buys palm oil mainly from Indonesia, Malaysia and Thailand, while it imports soyoil and sunflower oil from Argentina, Brazil, Russia and Ukraine.
"India's edible oil imports consist of more than 50% palm oil, so it's obvious that the Indian duty hike is going to have a negative impact on palm oil prices next week," said a New Delhi-based dealer with a global trade house. (With Reuters Input)
