Indian consumers won’t benefit much from edible oil duty slash, says industry body

The Indian government recently reduced duty on import of edible oil, including crude palm oil, by up to $ 112 per tonne in a move that would hopefully halt the galloping edible oil prices in the country, but the Solvent Extractors’ Association (SEA) of India believes that consumers may not eventually benefit from the reduction.

“Government was worried about high inflationary pressures in edible oil witnessed in last few months and this decision to reduce duties is supposed to help soften the blow to consumers. However, we feel palm oil markets had started seeing a downward slide and our import duty reduction will actually help palm-exporting countries to stop the slide as well as reverse the lowering trend that they have been experiencing,” said SEA India President Atul Chaturvedi.

The drop in the import duty on crude palm oil (CPO) is around $55/60 per tonne or around Rs 4,600 to Rs 5,000 per tonne.  And international prices of palm oil have fallen by 15 per cent to 20 per cent in the last month.

“In effect, India may end up losing revenue and at the same time not achieve its objective of bringing prices down for the consumers,” adds Chaturvedi.

SEA had been suggesting to the government to moderate duties when edible oil prices were at a peak during April to give some relief to the consumer. The government, however, delayed the announcement at that time in its efforts to encourage the oilseed farmer to plant more oilseeds.

Market analysts also fear that while it is tempting to slash the rate of customs duty on palm, soya, and sunflower oils, it is unlikely to have any decisive impact as overseas suppliers will soon increase the rates, negating any advantageous price impact.

Still, the introduction of ‘sunset clause’, which states that this reduction is only up to September 2021, is a welcome sign as kharif oilseed marketing starts in October, and lower duty can bring down the local oilseed prices and discourage Indian farmers from sowing.

The government’s decision to reduce duty till September will also help kill rumor mongering and help stabilise trade, which has been on tenterhooks over the last few months.

“Since the government is worried about inflation in edible oil prices during these pandemic times the same can be made available to weaker sections of society the public distribution system,” said Chaturvedi.

SEA, had in fact sent a letter to the government suggesting subsidising edible oils by Rs 30-40 per kg and then distribution via PDS. According to it, the port-based refineries have adequate spare capacity across the coastline of India for this purpose. This will give relief to the poor from rising edible oil prices.

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