Edible oil industry demands restoration of the import duty on palm oil by March to prevent slide in mustard prices


PUNE: India’s decision to slash import duty on crude palm oil to 27.5% from 37.5% is expected to ease food inflation, although domestic consumers will be able to enjoy only partial gains as global palm oil prices have increased, As the country is expecting a bumper harvest of rabi oilseeds, the industry has demanded that the duty be restored before farmers begin marketing of their crop from March 2021.

Edible oil prices have been rising since May despite the pandemic-led demand destruction due to global factors and shortage of domestic mustard crop. India reduced the import duty on crude palm oil with effect from November 27 following an increase in oil prices by nearly 50% in the past six months. As India is the largest importer of palm oil in the world, an increase in palm oil prices fuelled a rally in the entire edible oil complex in the country.

Ratings agency ICRA expects the duty reduction to help ease food inflation to some extent. “The increase in palm oil prices has led to a significant increase in prices of other edible oil prices as well. The oils and fats sub-index has a weightage of 3.56% in the composition of the CPI (Consumer Price Index), and 9.1% in the food and beverages sub-index; hence, higher oil prices have also contributed towards the recent increase in food inflation. ICRA expects the lowering of import duty to ease the rising pressure on food inflation to some extent,” it said.


“Our experience is that the benefit of duty reduction partly helps the domestic consumers and partly goes into increase in international prices,” said BV Mehta, executive director, Solvent Extractors’ Association.

Malaysia’s foreign minister Hishammuddin Hussein has thanked his Indian counterpart on behalf of his country’s small farmers on India’s decision to cut import duty. “This could further increase Malaysia’s palm oil exports to India which in turn could increase prices,” tweeted Hussein.

As the government has not reduced import duty on soya bean and sunflower oils, the industry expects an imbalance in the trade.

Another concern of the local crushing and processing industry is regarding the possible impact of increased palm oil imports on the prices of the rabi mustard crop. It has said that the import duty on palm oil should be reversed to 37.5% before farmers begin marketing of the mustard crop.

“The marketing of the rabi mustard crop will begin from end of February/March onward. If the prices remain below MSP (minimum support price) at the time of harvesting, the government may have to procure the crop at thesupport price,” said Mehta.

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