24/01/07 (Reuters)  -  NEW DELHI: India, the world's third-largest importer of vegetable oils, on Wednesday cut import duties on palm and sunflower oil products in a bid to cool rising inflation that the finance minister has said is a worry.

The duty cut on palm and sunflower oil follows Monday's trimming of import duties on capital goods, cement, steel, aluminium, copper and other raw materials after inflation rate hit a two-year high of 6.12 per cent in the year to Jan 6.

The government and the central bank have taken a string of measures to calm inflationary pressures in Asia's fourth-largest economy and Finance Minister Palaniappan Chidambaram has said rising inflation was "indeed a matter for concern".

The central bank reviews monetary policy on Jan 31 and a Reuters poll on Wednesday showed the Reserve Bank of India was expected to raise rates to rein in inflation and cool strong demand for loans.

In its latest move, the government reduced import duties on crude palm oil and palmolein to 60 per cent and those on refined, bleached, and deodorised palm oil and palmolein to 67.5 per cent.

The finance ministry said in a statement the move would lower prices of edible oils in the domestic market.

"This is primarily in response to the concern for inflation. The idea is that if you reduce customs duty things will become come cheaper," said T K Bhaumik, chief economist with industrial conglomerate Reliance Industries Ltd .

"If one is to link it to elections then the argument is, yes, it is important to bring inflation under control before elections."

Elections in some states - including in Uttar Pradesh, a key political battleground - will be held over the next two months and the next general election is expected in 2009.

The communist-backed federal coalition government is under pressure from its leftist partners to control prices of food and manufactured products.

In August, the government cut import duties on crude palm oil and palmolein to 70 per cent from 80 per cent, and those on RBD palm oil and palmolein to 80 per cent from 90 per cent, and in December, the cuts were extended indefinitely.

Traders said the reduction in import duty would bring down prices of oils in the domestic market by 1.5-2.0 rupees a litre provided exporting countries such as Malayasia do not raise prices.