As India gears up for its festive season, the government is taking proactive steps to ensure that rising edible oil prices don’t dampen the celebratory spirit. Recognizing the potential impact of fluctuating oil prices, the government has issued a directive to edible oil associations, urging them to maintain the maximum retail price (MRP) of oils until existing stocks imported at lower basic customs duty (BCD) are fully consumed. This move follows a significant increase in BCD on various edible oils, implemented to bolster local agriculture and stabilize domestic markets.
Basic customs duty is a tax levied on imported goods, acting as a protective measure for domestic industries by making imports more expensive. The recent increase in BCD aims to incentivize local oilseed production, ultimately supporting farmers’ incomes and ensuring a sustainable supply chain.
The government’s decision is informed by a number of factors, including a surge in global oilseed production and a subsequent increase in global ending stocks. This has led to a influx of cheaper imported oils, creating downward pressure on domestic prices. The government aims to counter this trend by raising the cost of imported oils, thereby encouraging local production and increasing oilseed prices, providing fair remuneration to domestic farmers.
The government is closely monitoring the situation, with officials stating that there is approximately 3 million metric tonnes of edible oils imported at lower duty, which is sufficient to meet domestic consumption for 45 to 50 days. This timeframe allows for a smooth transition as imported stocks are exhausted.
The government’s directive has been communicated to the Solvent Extraction Association of India, Indian Vegetable Oil Producers’ Association, and Soybean Oil Producers Association, who are tasked with ensuring that current retail prices remain unchanged during the transition period.
This policy shift comes amidst recent price reductions for oils such as sunflower, soybean, and mustard. These reductions, initially implemented in response to lower international prices and decreased import duties, provided relief to consumers but also put pressure on domestic oilseed prices. The government aims to address this imbalance by increasing import duties, effectively supporting domestic oilseed production and ensuring fair compensation for farmers.
Effective from September 14th, the BCD on crude soybean oil, crude palm oil, and crude sunflower oil has been hiked from 0% to 20%, resulting in an effective duty rate of 27.5% on crude oils. Similarly, the BCD on refined palm oil, refined sunflower oil, and refined soybean oil has been raised from 12.5% to 32.5%, with an effective duty rate of 35.75% on refined oils.
The government’s proactive stance reflects a broader strategy of balancing consumer interests with the need for agricultural sustainability. By safeguarding domestic oilseed production and supporting farmers’ incomes, the government aims to ensure long-term stability in the edible oil market and contribute to a resilient agricultural sector.
