2.5% Import Duty Hiked on Crude Edible Oil in India


Dated 18th January 2013

2.5% Import Duty on Crude Edible Oils

Move aimed at protecting domestic oil seed growers

The Government of India (GoI) has imposed a 2.5% import duty on crude edible oils to restrict overseas purchases and protect domestic oilseed growers. The import duty on refined varieties of palm oil, however, remains unchanged at 7.5% to check the prices.

The GoI has decided to levy these duties after an in depth consultation. The move is likely to encourage oil seed growers, after the meeting of the Cabinet Committee on Economic Affairs. With the enhanced duty on crude palm oil, price payable to farmers will increase by around Rs. 150 per ton. On the other hand, the impact of enhanced duty on prices of edible oils would be negligible at less than Re 1 per kg. The price may be further moderated on account of the huge stocks of palm oil in Malaysia and Indonesia, which may force these countries to lower the export duty currently levied in an effort to boost their exports. Initially the agriculture ministry, which moved the proposal, had proposed a 7.5% duty on crude edible oil and 15% on refined palm oil. The tariff value will be aligned with international oil prices and fixed on a fortnightly basis.

Since 31 July 2006, tariff values of edible oils have remained unchanged as a fiscal measure to contain inflation. The freeze has led to a significant variation between the notified tariff values and the landed prices based on international prices of edible oils, adversely affecting revenue collection and the domestic refining industry. The duty imposition will encourage domestic refiners.

The Solvent Extractors Association (SEA), an industry body, has sought that the government raise the import duty on crude palm oil by 10% and refined palmolein oil from the existing 7.5% to 20% to protect Soya bean and mustard seed farmers, who are struggling to find a right price in the market due to falling oil prices following heavy imports. The prices of refined palmolein oil have come down drastically from Rs 58,789 a ton in December 2011 to Rs 48,000 a ton in December 2012.

The import of edible oil during 2011-12 (Nov to Oct) rose 19% to 99.8 Lakh ton compared to 83.7 Lakh ton during the previous year. However, the domestic availability of edible oils during 2011-12 has been 73.4 Lakh ton as against 79.2 Lakh ton during the previous year. Edible oil companies, however, don’t see any immediate change in retail prices.

Raising the Barrier
The agriculture ministry had initially proposed a 7.5% duty on crude edible oil and 15% on refined palm oil, but the tariffs were quite steep and could have resulted in dearer oil prices in the country. Since 31 July 2006, tariff values of edible oils have remained unchanged as a fiscal measure to contain inflation the freeze has led to a major variation between the notified tariff values and the landed prices based on global prices.

SOURCE: GOVT. OF INDIA, Ministry of Finance

 

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