India has recently lowered the import tax on crude cooking oils, including sunflower oil, a significant move positively received by the local industry association.
The finance ministry has reduced the import tax from 20% to 10% for crude sunflower, crude palm, and soybean oils. After including the agri-cess tax of 5% and the social welfare cess duty, the effective import tax rate now stands at 16.5% across all three oils.
Import rates for refined, bleached, and deodorized (RBD) edible oils remain unchanged at 32.5%. Consequently, with the social welfare cess, the effective import tax rate is now 35.75%.
This change, effective from May 31, increases the net effective customs duty differential between crude and refined oils from 8.25% to 19.25%. This development has been applauded by the Indian Vegetable Oil Producers Association (IVPA).
Sudhakar Desai, president of the IVPA, stated, “This step strengthens domestic refining, protects jobs, and supports value addition across the edible-oil value chain.” He emphasized that it is a necessary measure to build resilience in India’s agri-processing ecosystem while helping the sector curb finished goods imports.
Desai further noted in an interview with Tripura Star News that these governmental tax cuts on crude edible oils are crucial for safeguarding the sector from the negative impacts of refined oil imports, which threaten the vegetable oil industry’s capacities.
Moreover, he mentioned that the decision will not only fortify the domestic refining capacities of Indian producers but also ensure fair pricing for oilseed farmers and consumers.
The Indian government implements the agri-cess tax, officially known as the Agriculture Infrastructure and Development Cess (AIDC), on commercial agricultural products, using the generated funds to boost the industry’s development.
In a similar fashion, the social welfare cess aims to finance education, health, and social security initiatives.
According to Reuters’ insights, India fulfills over 70% of its vegetable oil requirements through imports. The country primarily sources palm oil from Indonesia, Malaysia, and Thailand, while it imports soybean and sunflower oils from Argentina, Brazil, Russia, and Ukraine.
The Department of Food and Public Distribution (DFPD) elaborated: “Import duty on edible oils is one of the vital factors influencing the landed cost of edible oils and, subsequently, domestic prices.”
By reducing import duties on crude oils, the government aims to diminish landed costs and retail prices of edible oils. This initiative provides relief to consumers and addresses overall inflation. Moreover, it encourages domestic refining, ensuring farmers receive fair compensation.
May inflation figures indicate that the headline rate, measured by the consumer price index, fell by 18 basis points to 3.16%. Food inflation also decreased by 91 basis points to 1.78%, marking its lowest level since October 2021.
