Edible oil duty cut, imports to nip inflation

The government is considering allowing cheaper imports or getting state-owned canalising agencies to import palm, soy, rapeseed and mustard oil through the year as part of its extended inflation-management strategy.

Under the latter plan, the State Trading Corporation, MMTC, and Nafed may be asked to import 1 million tonnes of these oils from Indonesia, Malaysia, Argentina and Brazil and process them as marketable pouches.

The companies will be compensated for losses up to a 10 per cent limit, which the department of consumer affairs suggests would translate into a subsidy of Rs 500 crore.

Annual edible oil imports stood at around 1.7 million metric tonnes in November 2006-April 2007, the first six months of the latest "oil year" (November to October).

These moves were discussed at a recent meeting of the Cabinet Committee on Prices.

The government has so far cut import duties on edible oils thrice "" in January, February and April this year. These are a part of the nearly two dozen measures "" monetary, fiscal, supply side and administrative "" that the government and the Reserve Bank have taken to control inflation, which has dropped to 5.06 per cent, close to the central bank's target for 2007-08, against a persistent 6 per cent during January-February.

Retail prices of edible oils have been largely steady across the country, data the government interprets as suggesting the need to control them further.

However, import duty cuts may not lead to immediate benefits as prices of oil overseas go up in tandem with demand from India, the world's second largest importer of edible oils.