Poor households cut back on pricey edible oil as Centre weighs duty cut
Record edible oil prices have hit consumption among poorer households, as the Union government weighs options of reducing import duties amid soaring global rates and risks of food inflation.
India, the world’s biggest vegetable oil importer, meets two-thirds of its domestic demand for edible oil through foreign supplies. Surging prices, which more than doubled in May, have prompted the government to weigh options of cutting import duties.
“A proposal (to cut duties) is being examined and various inputs have been sought but no decision has been taken yet,” an official said, requesting anonymity.
Poor consumers have cut back sharply on edible oil, the base medium for cooking most Indian dishes. “It has become unaffordable now. My family of five needs at least three litres of mustard oil a month. We managed with two litres last month by cooking less quantities of food,” said Ram Ratan, a tailor in northeast Delhi.
Edible oil prices have risen up to 60%, according to data from the consumer affairs ministry. Average costs of a litre of mustard oil rose to ₹170 in May compared to ₹120 a year ago.
One inflation measure, the Wholesale Price Index, rose 10.49% in April 2021, an 11-year high, with food prices rising 4.92% year-on-year.
This month, Haryana issued orders to stop distributing subsidised edible oil to the poor through the public distribution system due to high prices of procurement and will give cash instead, according to a state government official.
Five varieties of edible oil, mustard, groundnut, sunflower, soya, and palm oil, are commonly used by consumers and food manufacturers. Palm oil is a key ingredient of most processed food and biscuit manufacturers are its largest consumer.
The government has held several meetings with importers, sellers, and industry representatives, asking them to keep prices within reasonable limits.
“In a recent meeting, states have been advised to crack down on hoarding of essential commodities. The consumer affairs ministry is strictly monitoring prices, global and domestic. Orders have been issued to speed up custom clearances,” the official quoted above said.
The government expects prices to cool. “We have to look at sowing trends. Monsoon this year will be good, so we expect good production,” an agriculture ministry official said.
At the meeting organised by the consumer affairs ministry, various views were presented. “One view was that lowering duties could discourage farmers from planting oilseeds,” the official quoted in the first instance said.
A reduction of duty can help cut down costs. India imposes tariffs ranging between 32.5% and 35% on edible oil imports; traders mostly import from Indonesia, Malaysia, Argentina, Ukraine, and Russia.
“Lower production of palm oil in Malaysia and soyabean oil in China have stoked prices. Demand for biofuels has also increased, affecting availability,” said Abhishek Agrawal of Comtrade, a commodities trading firm.
Palm oil is the cheapest edible oil. Its import price on arrival at ports shot up to $1,173 per tonne in April compared to $600 a year ago, said BV Mehta of the Solvent Extractors’ Association of India.