June 5, 2021
India is planning to reduce import taxes on edible oils after cooking oil prices hit record highs last month, to reduce food costs in the world’s biggest vegetable oil importer. A proposal to lower the import duty on edible oils is under appraisal and the government will make a final decision to cut the taxes sometime this month.
While no decision has been made, the tax reduction could lower local prices and boost consumption, giving support to Malaysian palm oil, along with soy and sunflower oil prices, and dampening prices of local oilseeds such as rapeseed, soybean and groundnut.
Domestic soy oil and palm oil prices have more than doubled in the past year, hitting consumers already stung by record fuel prices and reduced incomes amid the Covid-19 pandemic.
India meets nearly two-thirds of its edible oil demand through imports, levying a 32.5% tax on palm oil imports, while crude soybean and soy oil are taxed at 35%.
It buys palm oil from Indonesia and Malaysia, and soy oil and sunflower oil come from Argentina, Brazil, Ukraine and Russia.
There are different views about it. One view is to first monitor the planting of Kharif (summer-sown) oilseeds and see how it pans out and the other view is to evaluate the impact of lowering the duty.
Yet, some in the industry are opposed to cutting import duties because that may only help overseas suppliers and discourage farmers from expanding oilseed acreage.
The average landed price of crude palm oil at Indian ports was $1,173 per tonne in April 2021 compared to $599 a year ago, according to data from the Solvent Extractors’ Association of India (SEA), a trade body.
During a meeting with government officials last week on reducing edible oil prices, the SEA suggested using the taxes to subsidize sales to consumers. The government can help poor people even without cutting import tax by providing subsidized edible oils.