The Indian government on Friday night increased import duties on edible oils to help farmers get better prices for kharfu oilseed after the import duty on the oil fell below the minimum support price fixed for the current crop year.
The decision is part of a series of immediate steps taken at Wednesday’s meeting of the Cabinet Committee on Prices chaired by Minister for Home Affairs and Cooperation Amit Shah.
The government, through a gazette notification, has increased basic customs duty on crude soya bean oil, crude palm oil and crude sunflower oil to 20 per cent from the current 0 per cent.
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It also increased import duty on refined palm oil, refined sunflower oil and refined soybean oil to 32.5 percent from the current 12.5 percent. Prices of edible oils, especially palm oil, have fallen in the past two sessions on fears that India may increase import duties.
A 5 percent agriculture infrastructure development cess will be levied in addition to the import duty.The decision to hike customs duty on edible oils comes in conjunction with the government’s move to scrap minimum export taxes on onions and basmati rice, reduce stock limits on wheat and allow duty-free import of peas till December 31.
The customs duty on crude palm oil will be $965 per tonne, on RBD palm oil $976. On other palm oils it will be $971, on crude palm olein $981 and on RBD palm olein $984. On crude soybean oil the customs duty will be calculated at a rate of $1,011.
A political move?
While the decision has been broadly welcomed by the industry, it is also being seen as a political one in light of upcoming assembly elections in key states such as Haryana and Maharashtra.
However, the decision was taken to coincide with the arrival of the kharhu crop so that farmers could get profitable prices.
The Cabinet Committee on Prices on Wednesday reportedly asked for all records relating to edible oil, onion, basmati rice, non-basmati rice, sugar and ethanol. Union Minister for Road Transport and Highways Nitin Gadkari has also been invited to the meeting, suggesting that a positive decision on onion exports is likely to be taken.
Pressure is mounting on the government as soybean prices have fallen below the minimum support price of Rs 4,892 per quintal fixed for the current crop year (July 2024-June 2025).
The Ministry of Agriculture and Farmers Welfare has allowed the states of Karnataka, Maharashtra, Telangana and Madhya Pradesh to procure soybean at MSP under the price stabilisation scheme.
A win-win for everyone
The Solvent Extractors Association (SEA) said the best solution to address oilseed prices below MSP is an across-the-board increase in import duty on crude edible oils and refined oils by 20-25 per cent, with a minimum duty differential of 15 per cent.
“This will lead to remunerative prices for farmers for their produce and market forces will be able to pay farmers prices above the MSP price. At the same time, the government will no longer have to procure at MSP. It will be a win-win situation for farmers, industry and the government,” SEA director general BV Mehta said in a statement on Thursday.
India has allowed duty-free import of edible oil in May 2022 following a surge in edible oil prices globally due to supply shortage. The impact of El Niño weather on oilseed production has forced the Indian government to allow duty-free imports at least till March 2025.
However, record soybean harvest in the US and falling prices of oilseeds and edible oils in the global market led to a collapse in domestic oilseed prices, resulting in higher tariffs.
