Edible oil price fall spurs rethink on import duty

With a sharp fall in retail prices of edible oils over the last six months in line with the global trend, the government is considering withdrawing the import duty concessions on these products.

The import tariffs on edible oils were slashed last year in the wake of elevated domestic prices. Sources said that a final decision to reintroduce/ hike duties will be taken after gauging the arrival of the fresh mustard crop.

“We will be reviewing the situation in May when the domestic mustard crop would enter the market,” an official told FE.

India imports about 56% of the total annual edible oil consumption of around 25 million tonne. The share of domestic edible oil includes mustard (40%), soyabean (24%) and groundnut (7%) and others. The landed prices of palm oil (at Mumbai port), which has close to 60% share in the country’s import basket, has declined by 38% to $ 985/tonne on February 3, against $1,594/tonne prevailed a year ago. Landed prices of crude soy and sunflower have declined 18% and 17% to $1,595/tonne and $1,250/tonne respectively.

The government cut import duties on crude palm, soyabean and sunflower oils in September 2022. In December 2022, it extended the concessional duties on edible oils till March 31, 2024.

At present, crude palm, soyabean and sunflower oils imports attract only 5% agri infra cess and a 10% education cess upon it, meaning a total tax incidence of 5.5%.

The government had approved import of 2 MT of crude soyabean and sunflower annually for FY23 and FY24 at zero import duty.

Annual imports of edible oil is around 13 MT, mostly palm oil (8 MT), soyabean (2.7 MT) and sunflower (2 MT). While palm oil is imported from mostly Malaysia and Indonesia, soyabean and sunflower oils are imported mostly from Argentina and Ukraine.

The country in FY22 had imported edible oil valued at `1.5 trillion.

Palm oil prices rose sharply globally when Indonesia, the biggest exporter of oil, imposed a ban on palm oil exports on April 28 last year; it was lifted after three weeks. Since then, palm oil prices have declined.

The edible oil and fat category saw marginal inflation at 0.53% in December 2022, mostly contributed by a decline in domestic prices of edible oil since May.

For mustard oil, prices declined by 8.6% in December 2022. Inflation in refined oil (sunflower, soyabean and palm) was at 5.2% because of a decline in global prices of edible oil.