The Department of Revenue has announced a reduction in the customs duty on imports of soya bean oil and sunflower oil from 17.5 percent to 12.5 percent. The revised customs duty rates will take effect from June 15, 2023. This move is expected to make essential cooking oils more affordable for consumers in India.
Impact on Import Duty Rates
As a result of this revision, all crude oils, including crude palm oil, sunflower oil, and soya oil, will be subject to a 5 percent import duty, resulting in a total tax incidence of 5.5 percent. In the case of refined edible oil, the effective import duty will be 13.75 percent. However, for refined oil, the import duty will be 12.5 percent, along with an additional 10 percent cess on the import duty. These adjustments reflect the updated tax structure for different categories of edible oils in India.
Industry Response
According to B V Mehta, the Executive Director of the Solvent Extractors’ Association of India (SEA), the reduced duty difference between crude and refined soya and sun oils may not make the shipment of refined soybean oil or sunflower oil commercially viable but could have a temporary sentimental impact on the market.
Import Dependency and Consumption
India heavily relies on imports to meet approximately 60 percent of its annual consumption of 24 million tonnes of vegetable oils. Out of the total 14 million tonnes of edible oil imports made by India each year, crude oil accounts for 75 percent of the share, while refined oil constitutes the remaining 25 percent, according to data from the Solvent Extractors’ Association of India (SEA).
Trends in Imports
The import trends in India have shown a significant increase in imports of palm products from November to April, reaching 4.9 million tonnes compared to 3.2 million tonnes during the same period last year. The share of palm oil in total imports rose from 49 percent to 61 percent, while the import of soft oils decreased. However, there has been a notable surge in shipments of sunflower and soybean oils in the past two months, totaling 3.1 million tonnes in the first half of the current oil year (November-October), compared to 3.3 million tonnes last year. As a result, the share of soft oils decreased from 51 percent to 39 percent, as per data from the Solvent Extractors’ Association of India (SEA).
Price Comparison
The landed price of crude palm oil (CPO) at Mumbai port stood at $860 per tonne as of June 2, compared to $1,557 during the same period last year. Crude soy oil is priced at $970 per tonne, down from $1,686, while sunflower oil is quoted at $860 per tonne, a decrease from $1,941 per tonne last year. On the other hand, the prices of refined soy oil are currently at Rs 90,000 per tonne, and sunflower oil is priced at Rs 92,000 per tonne. In comparison, during the corresponding period last year, refined soy oil was priced at Rs 1.4 lakh per tonne, and sunflower oil was at Rs 1.7 lakh per tonne, according to data from the Solvent Extractors’ Association of India (SEA).
Government Measures
In an effort to support the edible oil industry, the government had previously reduced import duties on crude palm, soybean, and sunflower oils in September of the previous year.
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