Your cooking oil in India is about to become cheaper
What's the story
In a major move to control food inflation and support the domestic refining sector, the Indian government has lowered the basic import tax on crude edible oils. The new duty is now set at 10%.
The reduction applies to crude palm oil, soyoil, and sunflower oil.
With additional levies included, the total import duty for these oils will be reduced from 27.5% to an effective rate of 16.5%.
Impact
Duty reduction to benefit consumers, refiners
The duty reduction is expected to lower local prices of edible oils, benefiting both consumers and vegetable oil refiners.
B.V. Mehta, Executive Director of the Solvent Extractors's Association of India (SEA), said this move creates a "win-win situation" for all stakeholders involved.
The Centre has not changed the import duty on refined palm oil, refined soyoil, and refined sunflower oil, which currently attract a 35.75% import tax.
Market shift
Import duty gap to boost local refining industry
The import duty gap between refined and crude edible oils has widened to 19.25%. This is likely to prompt importers to favor crude over refined oils, thereby boosting the local refining industry.
India imports over 70% of its vegetable oil requirements, mainly sourcing palm oil from Indonesia, Malaysia, and Thailand while soyoil and sunflower oil come from Argentina, Brazil, Russia, and Ukraine.
Demand revival
Duty cut expected to revive retail demand
Sandeep Bajoria, CEO of Sunvin Group, a vegetable oil brokerage, said the basic duty cut is likely to reduce edible oil prices and revive retail demand. The demand has been sluggish in recent months.
The government hopes this move will not only bring down food prices but also stimulate domestic consumption of edible oils.