India likely to raise vegetable oil import taxes to help support local farmers
India is likely to raise import taxes on vegetable oils for the second time in less than six months to help support thousands of oilseed farmers reeling from a crash in domestic oilseed prices, two government sources said on Friday.
The hike in import duties by the world's largest importer of edible oils could lift local vegetable oil and oilseed prices, while potentially dampening demand and reducing overseas purchases of palm oil, soyoil, and sunflower oil.
"(The) Inter-ministerial consultations regarding duty hike are over," said a government source, who did not wish to be named as he was not authorised to talk to the media. "The government is soon expected to raise the duties."
The government would take into account the impact of the decision on food inflation, said another government source who also did not wish to be identified, citing official rules.
A government spokesperson did not immediately respond to a request from Reuters for comment.
In September 2024, India imposed a 20% basic customs duty on crude and refined vegetable oils. After the revision, crude palm oil, crude soyoil, and crude sunflower oil attracted a 27.5% import duty, compared to 5.5% previously, while refined grades of the three oils now have a 35.75% import tax.
Even after the duty hike, soybean prices are trading more than 10% below the state-set support price. Traders also expect winter-sown rapeseed prices to fall further once new-season supplies begin next month.
Domestic soybean prices are around 4,300 rupees ($49.64) per 100 kg, lower than the state-fixed support price of 4,892 rupees.
Due to lower oilseed prices, it makes sense to raise import duties on edible oils, said the first official, adding that the exact amount of the hike has not yet been decided.
Oilseed farmers are under pressure, and they need support to maintain their interest in oilseed cultivation, said B.V. Mehta, executive director of the Solvent Extractors' Association of India.
Reuters on Thursday reported that Indian refiners have cancelled orders for 100,000 metric tons of crude palm oil scheduled for delivery between March and June, partly due to the likely hike in import duties.
India meets nearly two-thirds of its vegetable oil demand through imports. It buys palm oil mainly from Indonesia, Malaysia and Thailand, while it imports soyoil and sunflower oil from Argentina, Brazil, Russia and Ukraine.
($1 = 86.62 rupees)
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