Import duty hike in edible oils fails to spur domestic oilseeds rates

The Government on September 13, 2024 had increased the import duty on cooking oils on the assumption that the step would help farmers get better prices for kharif oilseeds after the rates dropped below their minimum support prices. But, an analysis of average prices in agriculture market yards (mandis) show that soyabean prices have fallen to ₹3,962/quintal now from ₹4,184/quintal in October 2024 in Madhya Pradesh and to ₹3,944/quintal now from ₹4,145/quintal in October 2024 in Maharashtra. The MSP of soyabean is ₹4,892/quintal.

Similarly, average prices of groundnut have fallen to ₹5,186/quintal now from ₹5,601/quintal in October 2024 in Gujarat and to ₹4,275/quintal now from ₹4,964/quintal in October 2024 in Madhya Pradesh. The MSP of groundnut is fixed at ₹6,783/quintal.

The farmers’ resentment on below MSPs for their crops has also led to aggressive procurement by the Centre under MSP operation. Centre’s nodal agency cooperative major Nafed has purchased 14.72 lakh tonnes (lt) of soyabean in the first five months of Kharif marketing season since it began from October 1. It included 8.37 lt from Maharashtra, 3.89 lt from Madhya Pradesh and nearly 99,000 tonnes from Rajasthan.

The all India groundnut procurement stood at 13.77 lt, out of which 9.23 lt from Gujarat and 3.78 lt from Rajasthan have been bought at its MSP by Nafed. Though, the other agency NCCF also buys oilseeds under the price support scheme (PSS), its procurement data are not available. India had permitted duty-free imports of edible oils in May 2022 after their prices surged globally due to supply shortages. But, after the duty was levied -- the basic customs duty on crude soyabean oil, crude palm oil and crude sunflower oil to 20 per cent from zero per cent, on refined palm oils, refined sunflower oils and refined soyabean oils to 32.5 per cent from 12.5 per cent, the 5 per cent agricultural infrastructure development cess was also retained.

The effective duty on crude palm oil, crude soyoil, and crude sunflower oil attracted a 27.5 per cent import duty, while refined varieties of these oils attract 35.75 per cent duty (including additional cess).

Though the edible oil industry has suggested to increase import duty on crude edible oils and refined oils with a duty difference of minimum 15 per cent between crude and refined variety, some experts questioned any rational to raise import duty further when in the first round of revision there is little impact. “What is the guarantee that domestic oilseeds prices would be helped by further increase in import duty. Leaning from the last experience the government should look into issues like imported edible oils getting routed via Nepal to avoid duty due to bilateral treaty with the neighbouring country,” said a top official of an industry body.

India imports palm oil from Indonesia and Malaysia while soyoil is purchased from Argentina, Brazil and Brazil, and and sunflower oil from Russia and Ukraine.