Top buyer India extends low edible oil import duty to cap prices

India, the world’s top edible oil importer, allowed traders to buy crude palm, soybean and sunflower oils at low duties for another year in a move that may sustain overseas purchases and cap prices before elections.

Traders and processors will benefit from a zero base import tax until the end of March next year, according to a finance ministry notification. However, they still pay other levies, such as agriculture and social welfare duties, which are imposed on top of the base rates. 

The move may help the government control retail inflation, which hit a four-month high in December from a year earlier on more expensive farm commodities. Food inflation, accounting for about half of the consumer price basket, climbed to 9.53% from 8.7% in November.

“While the government aims to maintain price stability, the long-term policy has adverse effects on local oilseed growers,” said B.V. Mehta, executive director of the Solvent Extractors’ Association of India. The pressure on prices effectively discourages farmers from planting more, he said.

The basic customs duty on refined palm, soybean and sunflower oils will continue to be 12.5% over the same period, the notification said.   

Rising food prices could hurt Prime Minister Narendra Modi’s government before elections due in the first half of 2024. His administration has restricted exports of a wide range of products, including onions, wheat, rice and sugar, in a bid to cool costs. The government plans to continue the curbs for now, Food Minister Piyush Goyal said Saturday. 

“Being an election year, the government is not taking any chances,” said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental in Mumbai. It wants to control inflation in the country, he said.