India to cut edible oil import duty ahead of festivals: Will it bring relief after prices rise 20% in a year?

India cut import duties on crude and refined edible oils, including palm oil, soybean oil and sunflower oil, to lower domestic prices ahead of the festive season. The government announced the changes in a notification issued late on Wednesday.

Edible oil prices in India have risen by nearly 20% over the past year. The tariff cut is expected to lower prices and boost consumption during major religious holidays between September and November, when demand for sweets, snacks and fried foods typically rises, Reuters reported.

Internationally, stronger Indian buying could also support Malaysian palm oil and U.S. soybean oil futures, traders told Reuters.

The government has reduced the import duty on palm and soybean oil

The basic import duty on crude palm oil and crude soybean oil has been reduced to 5% from 10%, while the duty on refined palm oil and refined soybean oil has been reduced to 27.5% from 32.5%, according to a government announcement.

The basic import duty on crude sunflower oil was reduced from 10% to 0%. For refined sunflower oil, the duty was reduced to 22.5% from 32.5%.

In addition to the basic duty, the import of edible oil is also subject to an agricultural infrastructure and development fee and a social security surcharge.

As a result, the total import duty on crude palm oil and crude soybean oil will be reduced to 11% from 16.5%, while crude sunflower oil will be subject to a total duty of 5.5%, down from 16.5%.

Refineries expect an increase in imports

The cut in duty comes ahead of the festive season, when demand for edible oils usually increases.

“Awaiting the reduction in import duty, refiners have refrained from purchases but will now increase imports to meet demand after the festival season,” Mumbai-based Sandeep Bajoria, chief executive of vegetable oil trader Sunvin Group, told Reuters.

Reuters reported last week that India is considering cutting import duties on edible oil to provide relief to consumers during the festive season.

Sunflower oil has the greatest benefit

India imports nearly two-thirds of the vegetable oil it consumes, with palm oil, soybean oil and sunflower oil accounting for the majority of imports. Major suppliers include Malaysia, Indonesia, Argentina, Russia and Ukraine.

Sunflower oil is expected to benefit the most from the latest tariff cut.

The move makes sunflower oil more attractive to refiners and could shift some demand away from soybean oil and palm oil, Aashish Acharya, vice president of Patanjali Foods Ltd, told Reuters.

The impact of the tariff cuts on retail prices will depend on how lower import costs are reflected in the supply chain as refiners increase purchases to meet holiday demand.

(With inputs from Reuters)