India Cuts Edible Oil Import Duty Ahead Of Festivals: Will It Bring Relief After Prices Rose 20% In A Year?

(MENAFN- Live Mint) India has reduced import duties on crude and refined edible oils, including palm oil, soy oil, and sunflower oil, to ease domestic prices ahead of the festive season. The government announced the changes in a notification issued late on Wednesday.

Edible oil prices in India have risen nearly 20% over the past year. The duty cut is expected to lower prices and support consumption during the major religious festivals between September and November, when demand for sweets, snacks, and fried foods typically rises, Reuters reported.

Internationally, stronger Indian buying could also support Malaysian palm oil and US soy oil futures, traders said.

Import duty cut on palm, and soy oil

The basic import duty on crude palm oil and crude soy oil has been reduced to 5% from 10%, while the duty on refined palm oil and refined soy oil has been cut to 27.5% from 32.5%, according to the government notification.

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The basic import duty on crude sunflower oil has been reduced to zero from 10%. For refined sunflower oil, the duty has been cut to 22.5% from 32.5%.

Edible oil imports also attract the Agriculture Infrastructure and Development Cess and Social Welfare Surcharge, in addition to the basic customs duty.

As a result, the total import duty on crude palm oil and crude soy oil will fall to 11% from 16.5%, while crude sunflower oil will attract a total duty of 5.5%, down from 16.5%.

Refiners expected to increase imports

The duty cut comes ahead of the festive season, when demand for edible oils typically increases.

"Anticipating a reduction in import duty, refiners had held back on purchases, but they will now step up imports to meet festival-season demand," said Mumbai-based Sandeep Bajoria, chief executive of Sunvin Group, a vegetable oil brokerage.

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Reuters reported last week that India was considering a reduction in edible oil import duties to provide relief to consumers during the festive period.

Sunflower oil gets biggest benefit

India imports nearly two-thirds of the vegetable oil it consumes, with palm oil, soy oil and sunflower oil forming the bulk of imports. Major suppliers include Malaysia, Indonesia, Argentina, Russia and Ukraine.

Sunflower oil is expected to be the biggest beneficiary of the latest duty reduction.

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The move makes sunflower oil more attractive to refiners and could potentially divert some demand away from soy oil and palm oil, said Aashish Acharya, vice president at Patanjali Foods Ltd.

The impact of the duty cuts on retail prices will depend on how lower import costs are reflected across the supply chain as refiners increase purchases to meet festive-season demand.

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