Lower edible oil import duty to stay till March 31, 2025
23.12.2023 (Financial Express) - The government on Friday extended the lower import duty structure for palm, soyabean and sunflower oils by a year till March 31, 2025, which the industry says may adversely impact processing and prices of domestic oilseeds.
Currently, crude palm, soyabean and sunflower oil imports attract only a 5% agri infra cess and a 10% education cess, resulting in a total tax incidence of 5.5%. To provide relief to consumers, the government in June had reduced the import duty on refined soyabean and sunflower oils to 12.5% from 17.5%.
“With the continuance of lower duty structure, India will be a dumping ground for cheap edible oil which would hurt farmers as well as processors,” BV Mehta, executive director, Solvent Extractors Association of India (SEA), told FE.
India’s import of edible oils – palm, soyabean and sunflower – rose 17% on year to a record 16.47 million tonne (MT) in the 2022-23 oil year (November-October), helped by lower import tariffs, according to the trade body .
India imports about 58% of the total annual edible oil consumption of around 24 to 25 MT. In terms of share in domestic output, the share of oils includes mustard (40%), soyabean (24%) and groundnut (7%), among others.
Due to large imports of edible oil, the retail inflation in the oil and fat category has been in the negative zone since February 2023 as global prices softened. Inflation in cooking oil declined by 15.03% last month on year.
The volume of imports of these cooking oils had seen a peak of 15.1 MT in 2016-17. However, the value of edible oil imports in 2022-23 declined 11% to `1.38 trillion from a record `1.56 trillion in 2021-22 because of subdued global prices.
The share of palm oil, including crude and refined, in total edible oil imports was 59% in the 2021-22. Palm oil is mostly imported from Indonesia, Malaysia and Thailand.
SEA has stated that the import of RBD Palmolein or refined palm oil last year constituted over 25% of the total palm oil imports, which has “significantly impacted the domestic refining industry, which is grappling with a significant underutilisation of its installed capacity”.
Domestic oil processors have urged the government to increase the gap between effective import duty on crude and refined edible oils, which are currently at 5.5% and 13.75%, respectively, especially when current landed prices of refined bleached and deodorised (RBD) palm oil are at par with or lower than the crude oil prices.
Imports of crude soyabean and sunflower oil last year were 3.67 MT and 3 MT, respectively. Soyabean oil was sourced from Argentina and Brazil, while sunflower oil was sourced from Russia and Ukraine.
Landed prices of crude palm oil (at Mumbai port), which hold close to a 46% share in the country’s import basket, declined 15.4% to $870/tonne on December 15, compared to $1,024 a year ago. Landed prices of crude soyabean and sunflower oil have fallen 34% to $955/tonne and $940/tonne, respectively.