In a move aimed at supporting domestic oilseed farmers, the Indian government has announced an increase in import taxes on various vegetable oils. Effective September 14, 2024, a 20% basic customs duty has been imposed on crude palm oil, crude soyoil, and crude sunflower oil. This adjustment raises the total import duty on these crude oils to 27.5%, up from the previous rate of 5.5%. Additionally, refined versions of these oils will now attract a 35.75% import duty, increased from the earlier rate of 13.75%.
The decision comes as a response to declining domestic oilseed prices, which have been trading below the government-set minimum support prices. For instance, domestic soybean prices are currently around 4,600 rupees per 100 kg, lower than the support price of 4,892 rupees. By increasing import duties, the government aims to protect local farmers from the adverse effects of cheaper imported oils flooding the market.
India relies heavily on imports to meet its vegetable oil demand, sourcing more than 70% from countries such as Indonesia, Malaysia, Thailand, Argentina, Brazil, Russia, and Ukraine. The hike in import duties is expected to elevate local vegetable oil prices, potentially dampening demand and reducing overseas purchases of palm oil, soyoil, and sunflower oil.
Industry experts have noted that this policy shift aims to balance the interests of both consumers and farmers. Sandeep Bajoria, CEO of Sunvin Group, a vegetable oil brokerage, stated that the move increases the likelihood of farmers receiving the minimum support price set by the government for their soybean and rapeseed harvests.
However, the increased duties have led to immediate market reactions. Following the announcement, Chicago Board of Trade soyoil futures extended losses, falling more than 2%. Additionally, Indian refiners have canceled orders for 100,000 metric tons of crude palm oil scheduled for delivery between October and December, partly due to the duty hike and rising international prices.
This development is part of a broader strategy by the Indian government to reduce reliance on imports and boost domestic production. In October 2024, India approved a 101 billion rupee ($1.2 billion) initiative to double its edible oil production over seven years, aiming to increase production from 12.7 million metric tons to 25.45 million tons by 2030-31.
The government continues to monitor the situation closely, balancing the need to support domestic agriculture while managing food inflation and ensuring affordable edible oil prices for consumers.
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