Duty cut on edible oil may hit sector

Any move to reduce customs duty on edible oil imports would be detrimental to the local crushing industry, industry players and traders said on Wednesday in reaction to the Lahiri Committee recommendation on rationalising the tax structure.

In its report, the committee has recommended uniform customs duty of 72.5 per cent on refined edible oils and 65 per cent on crude edible oils.

However, the panel favoured retaining 45 per cent customs duty on crude and refined soyoil. The existing customs duty on edible oils, except soyoil, is a high 75-90 per cent.

"If the recommendations are implemented, no miller would be in a position to purchase the large mustard crop due for harvesting in late March as product price would fall dramatically due to cheaper imports," Rajesh Agarwal, chairman, Soybean Processors Association of India, said.

He said such a move would only be successful if the government wishes to completely wean away local crushers from the edible oil industry.

Industry players said with the mustard seed crop expected to arrive in March-April, local millers would not be able to pay remunerative price to farmers, if imported edible oil is abundantly available.

"We do not endorse the recommendations of the Lahiri committee to reduce customs duty on edible oils as that would kill local trade," Devi Prasad Khandeliya, former president of Solvent Extractors Association of India, a local lobby group of oilseed traders, said.

He said local oilseed prices are already hovering around the minimum support price due to a bumper production and if customs duties are further reduced then oilseed prices would drop significantly.

India consumes around 11 million tonne of edible oils annually, half of which is imported. Palm oil and soyoil constitute the major chunk of edible oil imports.

Meanwhile, welcoming another recommendation of the Lahiri committee to raise the customs duty on vanaspati to 72.5 per cent from the current 30 per cent, most industry players wanted steps to canalise duty free import of vanaspati from Sri Lanka and Nepal.

"The increase in customs duty on vanaspati would have no affect if more than 3,00,000 tonne of duty-free vanaspati comes to India every year from Sri Lanka, Nepal and Bhutan," Khandeliya said.