The government announced on Friday that it will increase the basic import tax on crude and refined edible oils by 20 per cent, effective September 14. This adjustment aims to support local farmers struggling with falling oilseed prices.
The tax hike is expected to drive up edible oil prices, which could suppress consumer demand and subsequently reduce imports of palm oil, soy oil, and sunflower oil. Following the announcement, soy oil futures on the Chicago Board of Trade declined by over 2 per cent.
The government has imposed a 20 per cent basic customs duty on crude palm oil, crude soy oil, and crude sunflower oil. Additionally, the import duty on refined palm oil, refined soy oil, and refined sunflower oil has been raised to 35.75 per cent from the previous rate of 13.75 per cent.
In late August, Reuters reported that the government was contemplating raising import taxes on vegetable oils to support soybean farmers ahead of the upcoming regional elections in Maharashtra later this year.
Sandeep Bajoria, CEO of Sunvin Group, a vegetable oil brokerage, commented that this is the first time in a while that the government has tried to balance the interests of both consumers and farmers. He added that the increased duties may help farmers achieve the minimum support price for their soybean and rapeseed crops. Domestic soybean prices are around Rs 4,600 ($54.84) per 100 kg, below the state-set support price of Rs 4,892, as per the Reuters report.
India relies on imports to meet over 70 per cent of its vegetable oil demand, sourcing palm oil predominantly from Indonesia, Malaysia, and Thailand. In contrast, soy oil and sunflower oil come from Argentina, Brazil, Russia, and Ukraine.
In the report, a New Delhi-based trader with a global trading firm noted that since over 50 per cent of India’s edible oil imports are palm oil, the import duty hike is expected to negatively impact palm oil prices in the coming week. Due to the additional Agriculture Infrastructure and Development Cess and Social Welfare Surcharge, the total import duty on the three types of oils will now effectively be 27.5 per cent, up from 5.5 per cent.
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