Traders see little impact of edible oil duty cut as global mkts offset move

Edible oil prices in the domestic markets, which have been on the boil the past few months, might not come down much despite the Centre’s decision Tuesday to lower import duties as the corresponding prices in the international markets have moved up nullifying the impact of duty cut.

Traders and market watchers however were critical of the decision to allow import of refined palm oil without any restrictions (announced a day after the duties were lowered) on the grounds that it will lead to flood of cheap edible oils from Malaysia and Indonesia and sound the death knell for the domestic industry.

“They (Centre) talks about making India Atmanirbhar, but at the same time allows unrestricted entry of cheap refined oils. This will kill domestic refining and in six months all port based palm oil refiners will shut shop,” B V Mehta, Director General of Solvent Extractors Association of India (SEAI) told Business Standard.

Mehta said that the decision to lower import duties on crude palm oils by 5.5 per cent and on refined palm oil and palmolein oil by 18.15 per cent and 8.25 per cent respectively announced late last night by the Centre will also have limited impact on domestic prices as palm oil prices in Malaysia and Indonesia have already jacked up by $40-45 per tonne on the news that India has lowered its duty.

The Centre has said that duty reduction is applicable only till September 2021 to protect the interest of farmers as domestic kharif oilseeds crop will start hitting the market from October onwards.

The duty was reduced to control domestic edible oil prices which have risen as compared to last year.

“The net effect of the duty reduction on crude palm oil(CPO) which is the main and the largest imported edible oil in India, largely from Malaysia and Indonesia, is around $50/60 per tonne or Rs 4600-5000 per tonne in Indian rupees, but this has been nullified as traders in Indonesia and Malaysia jacked up their rates thus nullifying the impact of duty cut,” Mehta said.

He said that in the end neither the consumer stands to gain nor the government as the latter will lose revenue while for the former prices won’t go down as the international markets have hardened.

“The same thing had happened last November 2020, when duty reduction did not have any impact on retail prices as international traders jacked up their rates. The same is happening now as well,” Mehta said.

Traders and edible oil industry players said that the decision to lower the import duty and allow unrestricted entry has come at a time when already global palm oil prices have softened by 15-20 per cent from their peak which in turn has also facilitated a drop in domestic rates.

“I think; it is a decision which has come at least two months late. The decision to lower import duties should have been taken in April when prices were at their peak, now the markets are already on the downhill. But, if the monsoon situation goes for a toss, then everything will change,” another trader said.

India is heavily dependent on imports for meeting its domestic edible oil requirements, as the domestic oilseeds production is not enough to meet even half of its annual edible oil demand.

Between November 2020 to May 2021, India imported around 7.6 million tonnes of vegetable oils, which was 9 per cent more than the same period last year.

IN 2019-20 (November to October) oil year, India imported around 13.17 million tonnes of vegetable oils, of which 97 per cent was in crude form.

Palm oil, is the largest constituent of India’s edible oil basket and comprises almost 60 per cent of the annual edible oil imports both in crude and refined form.