Govt scraps basic customs duty, cuts cess on crude palm, soy, sunflower oil

Move might impact farmers' realisation when kharif harvest is on, say industry players

With prices of edible oils threatening to remain elevated during the festivals, the Centre Wednesday virtually abolished the basic customs duty on crude varieties of palm, soybean and sunflower oil and also slashed the agri-cess on them till March 2022, barely days after it authorised states to impose stock limits on oilseeds and edible oil.

However, traders and market watchers said that timing of the cut could have a negative impact on farmers’ realisation as they are harvesting their kharif soybean and groundnut crop.

While, at the same, how much it will impact final consumer prices is also unclear as already international markets had priced in the duty reduction and pushed up prices to negate the impact. India imports 55-60 per cent of its annual edible oil consumption, as domestic production is not enough to meet the demand.

The Solvent Extractors Association (SEA), a the premier body of domestic oilseed processors, though feels the retail prices could go down by upto Rs 15 per litre of major edible oils in the next few weeks.

Today’s reduction in import duties, is the fifth time since February 2021 that Centre has lowered the duties to cool down prices.

The last duty cut was announced on September 11 when the basic duties were lowered 2.5 per cent for crude oils and 35.75 per cent for refined oils.

The duty cuts will be effective from October 14 and will remain in force till March 31, 2022, the Central Board of Indirect Taxes and Customs (CBIC) said in a notification.

Crude palm oil will now attract agri infrastructure development cess (AIDC) of 7.5 per cent, while the rate will be 5 per cent for crude soybean oil and crude sunflower oil.

Before today’s reduction, the agriculture infrastructure cess on all forms of crude and refined edible oils was 20 per cent.

Post reduction, the effective customs duty on crude varieties of palm, soybean and sunflower oil will be 8.25 per cent, 5.5 percent and 5.5 per cent respectively.

Besides, the basic customs duty on refined varieties of sunflower, soyabean, palmolein and palm oil has been slashed to 17.5 per cent each from 32.5 per cent at present.

“The impact of the duty reduction on crude palm oil is about Rs 14,000 a tonne while on crude soybean oil and crude sunflower seed oil is about Rs 20,000 a tonne. The total benefit of duty reduction may not fully accrue to the Indian consumer. In fact, today after the announcement the duty reduction, the Malaysian Market has gone up by about Malaysian Ringgit (RM) 150 to 170 per tonne,” Atul Chaturvedi, President of Solvent Extractors' Association, the premier body of domestic oilseed processors, said in a statement.

He said the rumors in the market in the last few days have already discounted the domestic price to some extent, but yes, refined oil may cool down by Rs 6 to 8 per kg after the duty cut.

Data sourced from the department of consumer affairs shows that in Delhi markets prices of packed groundnut oil and mustard oil have risen by 2 per cent and 5 per cent respectively in the last one month, while that of soybean and palm oil has dropped by 5 per cent and 1 per cent.