India has slashed import duties on refined palm oil, and this step, according to many big edible oil companies, will make their products 3.5–5% cheaper for consumers.
The duty cut is targeted at controlling the rising cooking oil prices in the world’s biggest importer of vegetable oils. The total tax on refined palm oil now stands at 13.75%, down from 19.25%. While consumers may get some relief, the move is likely to hurt domestic crude palm oil refiners as imports of refined palm oil are expected to pick up following the announcement.
According to Angshu Mallick, managing director of Adani Wilmar, the prices of palm oil will cool off a bit, but the impact will be in the range of 3.5-5%. It depends how the international prices behave.
If international prices move up, then the impact of the duty cut will not be felt. Also, it depends on how the rupee behaves. If the rupee becomes weaker, the landed price of imported oil will go up.
The government has also suspended futures trading in mustard seed, soybean, crude palm oil, and refined soya oil for one year to keep a check on rising prices and speculative trading.
Import duty cuts will bring down prices by Rs 2 a litre. But the domestic crude palm oil refiners will have to face a tough time because of this duty cut, “said Sudhakar Desai, CEO of Emami Agrotech. Palm oil is mainly consumed by the hotel, restaurant, and catering (HoReCa) sectors. To supply palm oil in the domestic market, India must rely entirely on imports.Palm oil accounts for 38–40% of the country’s annual oil consumption of 21–22 million tonnes.
BV Mehta, executive director of the Solvent Extractors’ Association, said, “There are nearly 50 crude palm oil refining units in the country, which are located close to the ports.” They refine 7-8 million tonnes of crude palm oil annually. Their businesses will take a hit because of this duty reduction.