The Union government on Saturday slashed duties on edible oils to a decade’s low to ease prices at home, which have spiralled on the back of high global rates. The country meets two-thirds of its domestic demand for vegetable oils through imports.
The government has “further reduced the standard rate of duty on crude palm oil, crude soyabean oil and crude sunflower oil by up to 2.5%”, a statement said. The standard rate of duty on refined oils of palm, soyabean and sunflower stands had been cut by 32.5% in a series of moves to make vegetable oils cheaper.
In June, the government had cut duties on palm oil by 5% and lifted restrictions in the import of refined palm oil, as food inflation worries mounted.
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Edible oil prices have risen by up to 60%, according to data from the consumer affairs ministry from a year ago. Average costs of a litre of mustard oil rose to ₹170 in August compared to ₹120 a year ago.
“It may be noted that the International prices and thereby domestic prices of edible oils have been ruling high during 2021-22 which is a cause of serious concern from inflation as well as consumer’s point of view,” a government statement said.
{{/usCountry}}“It may be noted that the International prices and thereby domestic prices of edible oils have been ruling high during 2021-22 which is a cause of serious concern from inflation as well as consumer’s point of view,” a government statement said.
{{/usCountry}}According to an August report of the Food and Agricultural Organisation, global prices have rallied sharply in recent months due to bad crop in key producing nations and higher demand as economies reopened from Covid-19 shutdowns.
Higher food inflation not only impacts poorer households more, which tend to spend a larger share of their monthly budgets on food, compared to the well-off, but they also throw the Reserve Bank’s inflation targets off gear.
Palm is one of the most widely consumed oils, which is found in everything from bread to ice-creams. Cutting import duties can lower prices instantly. Edible oil is India’s third most high-value import, after crude oil and gold. India typically imports from producers such as Malaysia, Indonesia Brazil, Argentina and Russia.
Throughout June, the government was evaluating the price trends before taking a “decision” on cutting import duties, an official with knowledge of the matter said. The first cuts in tariffs came in June itself as global commodity outlook showed the high prices were likely to hold, the official said.
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“Prices are likely to slide only when summer harvests kick in by December. The duty cuts should bring down prices without much lag unless there is hoarding,” said Abhishek Agrawal, an analyst with Comtrade, a private commodity brokerage firm, adding retail prices should come down by at least ₹5.
Currently, India’s levies on edible oil imports ranges between 32.5% (for palm oil, the cheapest edible oil) and 35% for soyabean oil. The country produces about 11 million tonne of edible oil but consumption hovers around 24 million tonne.
According to official data, the share of rural and urban consumption in total is 3.8% and 2.7%. Much of the demand comes from commercial users, like biscuit and snack makers.