Govt scraps basic customs duty on crude palm, soya, sunflower oil to cool down cooking oil prices

The government on Wednesday scrapped basic customs duty on crude varieties of palm, sunflower and soyabean oils as well as cut duties on refined edible oils to ease retail prices of cooking oils and provide relief to consumers during the festive season.

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Edible oil industry body SEA said the retail prices of cooking oils, which are ruling at a very high level, could now come down by up to Rs 15 per litre.

The cut in import duty and cess, effective from October 14, will remain in force till March 31, 2022, the Central Board of Indirect Taxes and Customs (CBIC) said in two separate notifications.

Agri infrastructure development cess (AIDC) has also been reduced on crude palm oil, crude soyabean oil and crude sunflower oil.

Crude palm oil will now attract AIDC of 7.5 per cent, while the cess will be 5 per cent each for crude soyabean oil and crude sunflower oil. Earlier, the cess was 20 per cent, while basic customs duty was 2.5 per cent.

Post reduction, the effective customs duty on crude palm oil will be 8.25 per cent. The effective duty on crude soyabean oil and crude sunflower oil will be 5.5 per cent. Earlier, the effective duty on these three crude items was 24.75 per cent each.

The basic customs duty on refined varieties of sunflower, soyabean, palmolein and palm oil too has been slashed to 17.5 per cent each from 32.5 per cent. Refined versions do not attract AIDC.

Commenting on the development, Solvent Extractors' Association of India (SEA) Executive Director B V Mehta said: "The government has slashed import duties on edible oils because of high retail prices in the domestic market and the festive season."

However, he said the timing of the decision is not correct as it may impact farmers' income.

"Harvesting of soyabean and groundnuts has started. The decision to reduce import duties may bring down market prices and lower price realisation by farmers," Mehta said.

Asked about the impact of the decision on retail prices, Mehta said: "The retail prices of refined palm oil can can come down by Rs 8-9 a litre while that of refined sunflower and soyabean oil can come down by Rs 12-15/ litre post this duty cut".

Generally, the international prices rise after India reduces its import duties, he observed.

This is the fourth round of duty cut by the government in the last few months, as part of its efforts to reduce cooking oil rates in domestic retail markets. The government has also taken other steps including imposition of stock holding limits.

Edible oil prices in the domestic retail markets have shot up sharply by up to 46.15 per cent in the last one year due to global factors and tight supply locally.
India meets more than 60 per cent of its edible oil demands through imports.

As per SEA data, imports of edible oils rose 63 per cent to a record 16.98 lakh tonne during September, due to all-time high shipments of palm oil.

Earlier in October 2015, India had imported 16.51 lakh tonne.

Palm oil import in September 2021 at 12.62 lakh tonne is the highest in any single month since India started importing palm oil in 1996.

As per the data maintained by the Consumer Affairs Ministry, average retail prices of soya oil were ruling at Rs 154.95 per kg on October 9 this year, 46.15 per cent higher than Rs 106 per kg in the year-ago period.

Similarly, average mustard oil prices rose by 43 per cent to Rs 184.43 per kg from Rs 129.19 per kg, while that of vanaspati by 43 per cent to Rs 136.74 per kg from Rs 95.5 per kg in the said period.

In case of sunflower, its average retail price rose by 38.48 per cent to Rs 170.09 per kg on October 9 this year from Rs 122.82 per kg in the year-ago period, while palm oil prices rose 38 per cent to Rs 132.06 per kg from Rs 95.68 per kg in the said period.

Indonesia and Malaysia are the major suppliers of RBD palmolein and crude palm oil to India.

The country imports crude soybean degummed oil mainly from Argentina followed by Brazil, while crude sunflower oil is mainly imported from Ukraine followed by Russia and Argentina.

Abhishek Jain, Tax Partner, EY, says "Given, the surging edible oil prices, the Government has reduced the basic customs duty rates on crude as well as edible grade oils. The decision would be highly appreciated by the industry and would also help in reducing price burden on ultimate consumers