Import Duty Reduction Sparks Optimism in Edible Oil Sector
The recent cut in import duties on crude edible oils has been praised by industry experts for boosting domestic refining competitiveness. By favoring crude imports, the policy is expected to lower retail prices and improve capacity utilization, promising benefits for consumers and the entire manufacturing value chain.
- Country:
- India
The reduction in import duties on crude edible oils is expected to enhance the competitiveness of domestic refiners, according to a report by CareEdge Ratings. The reduction encourages refiners to prioritize crude imports over refined oils, thereby increasing capacity utilization and refining margins through greater domestic processing.
Announced on May 30, the government's decision to slash the Basic Customs Duty on key imported crude edible oils, including Crude Palm Oil, Crude Soybean Oil, and Crude Sunflower Oil, from 20% to 10% is widely viewed as an effort to curb domestic edible oil prices and control food inflation.
Despite the reduction, the Basic Customs Duty on Refined Edible Oils remains at 32.5%, enhancing the competitive edge for domestic refiners by widening the duty differential. This is expected to aid in better price discovery for consumers.
India, a leading importer of edible oils, fulfills about 55-60% of its domestic consumption through imports primarily from Indonesia and Malaysia. "The increased duty differential is poised to bolster competitiveness for domestic refiners," the CareEdge report highlighted.
Retail edible oil prices in India, previously on an upswing due to high global prices and currency depreciation, are anticipated to decline as refiners pass on cost savings following the duty cut. The Ministry of Consumer Affairs has directed edible oil companies to lower their Maximum Retail Prices and submit weekly updates on Price-to-Distributor rates.
With food inflation easing to 2.8% in May 2025 and forecasts of a robust monsoon, these trends are expected to reduce edible oil retail prices significantly. The duty revision is seen as a strategic policy intervention aimed at moderating inflation and boosting competitive strength for domestic refiners. "The increased duty differential is set to enhance gross refining margins and improve capacity utilisation, eventually correcting retail prices," stated Rajan Sukhija, Associate Director at CareEdge Ratings.
Priti Agarwal, Senior Director at CareEdge Ratings, noted, "This move benefits the entire edible oil sector, strengthening refiners' capacity utilisation and ensuring fair pricing for both farmers and consumers." (ANI)
(With inputs from agencies.)
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