India Slashes Edible Oil Import Duties Ahead of Festive Season

India has reduced import duties on crude and refined edible oils, including palm, soy and sunflower oil, in a bid to ease domestic prices ahead of the festive season. The changes were announced in a government notification issued late on Wednesday.

Edible oil prices in the country have risen by nearly 20% over the past year. The duty cut is expected to bring down prices and support consumption during the major religious festivals between September and November, when demand for sweets, snacks and fried foods typically rises.

What the notification changes

The basic import duty on crude palm oil and crude soy oil has been halved to 5% from 10%, while the duty on refined palm oil and refined soy oil has been reduced to 27.5% from 32.5%.

Crude sunflower oil now attracts zero basic import duty, down from 10%. For refined sunflower oil, the duty has been cut to 22.5% from 32.5%.

Edible oil imports also attract the Agriculture Infrastructure and Development Cess and the Social Welfare Surcharge on top of the basic customs duty. Taking these into account, the total import duty on crude palm oil and crude soy oil will fall to 11% from 16.5%, while crude sunflower oil will attract a total duty of 5.5%, down from 16.5%.

Refiners set to raise purchases

The duty cut comes just as festive-season demand begins to build. "Anticipating a reduction in import duty, refiners had held back on purchases, but they will now step up imports to meet festival-season demand," said Sandeep Bajoria, chief executive of Mumbai-based vegetable oil brokerage Sunvin Group.

India was considering a reduction in edible oil import duties to provide relief to consumers during the festive period, Reuters reported last week.

Sunflower oil the biggest gainer

India imports nearly two-thirds of the vegetable oil it consumes, with palm, soy and sunflower oil forming the bulk of shipments. Major suppliers include Malaysia, Indonesia, Argentina, Russia and Ukraine.

Sunflower oil is expected to benefit most from the latest reduction. The move makes it more attractive to refiners and could divert some demand away from soy oil and palm oil, said Aashish Acharya, vice president at Patanjali Foods Ltd.

How far the duty cuts translate into lower retail prices will depend on the extent to which reduced import costs are passed down the supply chain as refiners ramp up purchases for the festive season. Stronger Indian buying could also lend support to Malaysian palm oil and US soy oil futures, traders said.