The government is considering a proposal to raise import duties on crude and refined edible oils, with the domestic mandi prices of most oil seeds ruling below the minimum support prices for several months now. The agriculture ministry has suggested that import duty on edible oils should not be less than costs of cooking oils processed from any domestic varieties of edible oil. The government had reduced the tariffs on these products in early 2022, in the wake of lower domestic output and elevated prices. The global prices of edible oils, especially palm, soyabean and sunflower had remained elevated in 2022-2023 but has softened since the second half of last year, resulting in record imports. Easier crude oil imports have been adversely affecting the domestic oil processors. A final decision on how to raise the import duties on edible oils is likely to be taken by a committee of ministers, chaired by cooperation minister Amit Shah soon, sources said. Harvesting of kharif oilseeds mainly soybean and groundnut is likely to commence in October. Currently, crude palm, soybean and sunflower oil imports attract no basic customs duty but only 5% agri infra cess and 10% education cess, resulting in a total tax incidence of 5.5%. To bring down prices last year, the government had also reduced the import duty on refined soybean and sunflower oils to 13.75% from 17.5%. The Solvent Extractors Association of India (SEA) has urged the government to increase gap between import duty of crude and refined edible oil to at least 13% from current level of 8.25% for protecting domestic processing industry. The government has extended the lower import duty structure for palm, soybean and sunflower oils till March 31, 2025. Sources said in addition to raising import duty on oil import, the government will have to intervene by purchasing the commodity at MSP as earlier announced by the agriculture minister Shivraj Singh Chauhan. Trade sources said that robust crops prospects and cheaper imports of edible oil due to low tariff has impacted mandi prices of key kharif oilseed - soybean which is currently ruling at around Rs 4300/quintal, around 12% below the MSP of Rs 4892/quintal in Madhya Pradesh and Maharashtra, the key producing states. India is the world’s second-largest consumer and number one vegetable oil import and meets about 58% of its annual consumption of around 24 - 25 million tonne (MT) annually through imports. India’s import of edible oils – palm, soybean and sunflower – rose 17% on year to a record 16.47 MT in the 2022-23 oil year (November-October), helped by lower import tariffs. The import of edible oil last oil year was valued at Rs 1.38 trillion. Currently, India produces about 42% of its domestic edible oil consumption requirement. Mustard (40%), soybean (24%) and groundnut (7%) are other oils that have a share in domestic production. According to an official note, a lower import duty structure on cooking oils ensures that farmers find it less profitable to grow oilseeds due to lower selling prices compared to imported prices. Also Read‘Need to look at narrowing inclusivity gap,’ says Dammu Ravi at Global Fintech Fest 2024 ‘A dynamic import tariff structure when duties go up when prices fall remains counter-cyclical at the same time there is certainty in the market,’ it stated. According to Soybean Processors Association of India (SOPA), the output of oilseed variety in the 2023-24 crop year was estimated at 11.9 million tonne (MT), while the agriculture ministry has estimated output of oilseed variety at 13.05 MT. “As of today, the output for 2024-25 crop is expected to be better than last year,”D N Pathak, executive director, SOPA, told FE while adding the actual crop conditions can be assessed by early October when the harvesting of oilseed commences. In the last rabi season, despite having a record mustard production of 13.16 MT in 2023-24 crop year (July-June), the mandi prices were ruling below the MSP and the government agencies have purchased 1.2 MT of mustard from the farmers in key producing states of Haryana, Madhya Pradesh, Rajasthan and Uttar Pradesh this season.
