India Considering Hike in Edible Oil Import Duty

Government of India has announced overnight that in order to become self-reliant by boosting local oilseed production with the help of tax revenues, hike in edible oil import duty is being considered. According to government officials the government intends to increase some tax on edible oils. Indication of a 5 percent hike in duty is on radar as per official statement. This step will be discouraging vegetable imports by the country. Edible oils imports of palm oil/sunflower oil and soya oil will be therefore reduced in longer run following import duty hike.  

Under existing duty structure, India levies 37.5 percent and 45 percent import tax respectively on crude and refined palm oil. Imports of crude soybean oil, crude sunflower oil and rapeseed oil on the other hand attract 35 percent import duty. Reducing imports of edible oils would mean drop in the import bills of the country hence lower expenditure all in all. India spends around $10 billion every year on edible oil imports and India’s dependency foreign purchases have jumped to 70 percent from 44 percent in 2001/02. 

This step in favorable on the domestic front since it aims to increase India's self-sufficiency in producing edible oils locally and not depend on foreign supplies. Speaking on this context, B.V. Mehta, executive director of the Solvent Extractors Association of India (SEA) said various measures have been suggested by the SEA to increase oilseed production. Raising import taxes had been recommended as well. The revenue generated through this tax shall be utilized to increase oilseed plantation in North India, where farmers prefer mainly rice and wheat, and where soil fertility is quite high. Oilseeds like rapeseed, soybean and sunflower are mainly cultivated in rain-fed areas of India. On the other hand, farmers with better irrigation facility prefer wheat and rice that the government buys from them at a fixed price for public welfare schemes. Annually, edible oil imports from India annually total nearly 15 million tonnes, comprising more than 9 million tonnes of palm oil, and roughly 2.5 million tonnes of Soy oil and Sunflower oil each. India imports palm oil from Indonesia and Malaysia. Likewise, Soy oil and Sunflower oil are imported from Argentina, Brazil, Ukraine and Russia.