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India raises edible oil import duty by 20%

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Synopsis:

India’s import duty hike on edible crude and refined oils by 20% aims to support domestic farmers. This change will raise the total import duty on crude oils to 27.5% and refined oils to 35.75%, potentially raising domestic prices.

Edible crude and refined oils news today

In a move aimed at supporting local farmers, the Indian government has raised the import duty on crude and refined edible oils by 20%. The hike, effective from 14 September 2024, is designed to bolster oilseed prices in the domestic market, following a significant drop in prices. This change is expected to reduce overseas purchases of oils such as palm, soy oil, and sunflower oil, as the world's largest importer of these products seeks to balance the interests of its agricultural sector.

Impact on import duty structure

The 20% increase will affect crude palm oil, crude soy oil, and crude sunflower oil imports. Previously subject to a 5.5% duty, these oils will now face an overall import duty of 27.5% due to the addition of the Agriculture Infrastructure and Development Cess and the Social Welfare Surcharge.

Similarly, refined oils like palm, soy, and sunflower oil will increase their total import duty from 13.75% to 35.75%. This substantial rise in import tax is expected to impact both domestic oil prices and the volume of imports, driving up the cost of these products in the Indian market.

Domestic price protection

The government’s decision comes at a critical time for soybean and rapeseed farmers, who are grappling with prices that are lower than the minimum support price (MSP) set by the government. By increasing the duty on imported oils, the government aims to raise domestic prices and provide relief to local farmers. The new import structure will likely improve farmers’ chances of receiving prices at or above the MSP for their harvests.

Domestic soybean prices are around Rs. 4,600 per 100 kg, below the MSP of Rs. 4,892 per 100 kg. This price imbalance has been a cause for concern among farmers, and the government hopes this move will ease the pressure on the agricultural sector.

Effects on global trade

India imports over 70% of its edible oil needs, with more than half of this coming from palm oil, primarily sourced from Indonesia, Malaysia, and Thailand. The increased import duty is expected to lower the demand for imported oils, which could lead to a drop in global prices, particularly for palm oil. Additionally, India imports soy oil from Argentina and Brazil, as well as sunflower oil from Ukraine and Russia.

This decision to raise import duties is part of the government’s ongoing efforts to support domestic agriculture while attempting to balance consumer prices. The increase in import duties on edible crude and refined oils is expected to significantly impact both the domestic and global oil markets.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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