Import duty cut on palm oil to have limited effect on retail inflation: Companies

• Follow

The government’s recent announcement of cutting basic import duty on crude and refined palm oil until September 30—a measure to check edible oil inflation in the domestic retail market—would have a limited effect on the soaring prices, companies feel.

Among several measures announced, the government decided to cut the basic import duty on crude palm oil to 10% from 15% and on refined oil to 37.5% from 45%. With the reduction, the effective tax rate on the crude palm oil would come down to 30.25% from 35.75%, in turn, bringing down the retail prices of edible oils, the government said.

Following this, the Central Board of Indirect Taxes and Customs issued a notification to this effect on Wednesday. The effective duty includes cess and other charges.

Earlier on June 30, the Food and Public Distribution Department also recommended moving refined, bleached and deodorized palm oil and RBD palmolein to the free-to-import category, removing the restriction until 31 December.

Edible oil prices have increased more than double in the last one year.

But the edible oil companies feel the measures won’t have much effect on inflation as the duty cut is only on palm oil, rarely used in households. An average middle-class Indian household uses refined soya bean or sunflower oil, apart from using mustard oil widely. Nothing has been done in this segment.

Palm oil is mostly used by snack manufactures and hotels.

What are the companies saying?

Adani Wilmar, which sells edible oil under Fortune brand name, said the duty cut wouldn’t help much.

“If suppliers increase their prices, you don’t get the full benefit of the duty cut and the consumer will not get any relief,” Mint reported quoting Angshu Mallick, deputy chief executive of Adani Wilmar.

The Times of India quoted Solvent Extractors Association of India (SEA) executive director BV Mehta as saying that the reduction in the import duty of refined palm oil would not have much impact, as the inward shipments are restricted.

It is to be noted that around two-third of India’s edible oil needs are met through imports. India is the world’s leading vegetable oil buyer.

According to SEA data, India’s palm oil import rose by 48% to 7,69,602 tonne in May 2021 from 4,00,506 tonnes in the corresponding month in 2020, due to higher shipments of crude palm oil.

The country’s total vegetable oil imports increased by 68% to 12.49 lakh tonnes in May 2021 from 7.43 lakh tonnes in the same period a year ago. Palm oil has over 60% share in it.