Centre Reduces Agricultural Cess on Crude Palm Oil

The Union government has decided to reduce the agricultural infrastructure development cess (AIDC) on crude palm oil (CPO) from 7.5 percent to 5% effective February 13, thereby widening the gap between crude and refined oil. After this reduction, the effective difference between CPO and RBD palmolein will be 8.5%.

The Finance Ministry also extended the validity of the new duty on CPO and other crude oils to September 30 in a notification issued on Saturday. The effective duty rate on these crude edible oils will be 5.5%.

"This is a welcome step, but it is insufficient to support domestic refiners." We had requested a duty differential of at least 11% in order for domestic refiners to operate economically," said B V Mehta, executive director of the Mumbai-based Solvent Extractors' Association of India (SEA).

On December 20, the Centre reduced import duties on RBD palmolein and RBD palm oil by 5.5%, narrowing the gap between refined and crude varieties. The SEA had requested that the AIDC on CPO be reduced from 7.5% to 2.50%. While such a reduction would not have increased domestic cooking oil prices, it could have helped the industry save money, according to SEA.

Last month, SEA President Atul Chaturvedi urged Union Food Secretary Sudhanshu Pandey to include RBD palmolein and refined palm oil on the "restricted list" in order to save the domestic palm oil refining industry.

On February 3, the Food Ministry notified the order imposing stock limits on edible oils and oilseeds, making it mandatory for states to implement it. The Centre also extended the validity of the stock limits, which were set to expire on March 31, until June 30. The previous order, issued on October 8, had empowered states to impose stock limits, and only Uttar Pradesh, Karnataka, Himachal Pradesh, Telangana, Rajasthan, and Bihar had done so.

The Centre has requested that states implement the stock limit order on edible oils and oilseeds without disrupting the supply chain or negatively impacting trade. The stock limit is expected to reduce unfair practices such as hoarding and black marketing, and it is viewed as a measure to prevent further increases in edible oil prices.

Indian consumers can expect little relief from high edible oil prices until at least May, as a combination of factors such as labour shortages in South-East Asian oil palm plantations, surging crude oil prices, and dry weather in South America will keep them high. As a result of these factors, palm oil prices have soared to all-time highs this year, up 20%, while soyabean oil has risen 20%.