As the Centre mulls a proposal to increase the import duty on refined edible oil from the current 7.5 per cent to 10 per cent to protect the domestic industry, the ministry of agriculture has favoured a graded import duty structure to align landed cost – the end cost of a shipped item – with international prices.
In the ministry’s comments on a cabinet note to raise the import duty, officials said the department of agriculture it has suggested that instead of a broad one-stroke increase or decrease, edible oil import duties should be made more flexible, whereby they would automatically go up if international edible oil prices fall by a certain level and fall as soon as international oil prices rise by a certain percentage.
“This would ensure domestic refining industry is adequately protected from duty changes in other countries and there is no ambiguity in the structure,” the official explained.
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The duty differential between crude and refined edible oils should be maintained at the current level of 5 per cent, the department felt.
India previously revised the import duty on edible oils in January this year when the duty on crude oils was increased to 2.5 per cent from zero per cent, while that on refined oils was maintained at 7.5 per cent.
A final decision on the same is expected to be taken in the meeting of the cabinet committee on economic affairs (CCEA), to whom the matter has now been referred with comments from both departments.
The CCEA could take up the issue in its meeting expected to be held soon, an official said.
India’s imports of refined edible oil has jumped by over 41 per cent in 2012-13 oil marketing year that ended in October as compared to same period last year, mainly due to inverted duty structure in Indonesia and Malaysia.
India meets more than 50 per cent of their domestic demand through imports. Palm oil is being imported from Malaysia and Indonesia, while soyabean oil from Argentina and Brazil. The food ministry, which had originally floated the idea of an increase in import duty, is of the view that such a flexible graded import duty structure for edible oils should be only limited to palm and should not be extended to other oils.
“We also feel that any flexible import duty structure should not lead to spike in domestic edible oil prices as otherwise it would be detrimental to the interests of the consumers,” another official said.
According to the World Bank, the monthly average price of palm oil in October was around $859 per tonne, while it was $820 per tonne in September and $829 per tonne in August.
The prices are much lower than 2012 (January-December) average palm oil rates of $999.3 a tonne.
In 2012-13 (November-October) edible oil year, India imported a record 10.38 million tonnes of edible oil, of which 5.88 million tonnes was crude palm oil, while 2.22 million tonnes was refined palm oil. Whereas, in 2011-12, India imported 9.98 million tonnes of edible oils, of which crude palm oil was 5.99 million tonnes, while refined was 1.57 million tonnes.
