India's Strategic Move: Extending Edible Oil Import Duty Reduction to March 2025

In a significant move aimed at curbing food inflation and ensuring the availability of edible oils at affordable prices, the Indian government has extended the reduced import duties on key edible oils until March 2025. This decision comes as India, the world's largest importer of vegetable oils, seeks to stabilize local prices and increase domestic supply.

Background and Current Scenario: The import duty reduction, initially set to expire in March 2024, encompasses crude palm oil, crude sunflower oil, and crude soy oil. The basic import duty on refined soybean oil and refined sunflower oil had been previously reduced from 17.5% to 12.5%. This move is expected to directly benefit consumers, leading to eased domestic retail prices​​​​​​​​​​​​.

Government's Steps for Price Control: The Central Board of Indirect Taxes and Customs (CBIC) announced that the concessional customs duty on edible oil imports would continue, aiming to manage inflation and ensure the availability of these essential commodities. The import duty on crude varieties of palm oil, soybean oil, and sunflower oil is currently zero, with an effective duty of 5.5% after accounting for agricess and social welfare cess. For refined varieties, the basic customs duty varies, leading to different effective duty rates​​​​.

Impact of International Prices : High international prices of edible oils in 2021-22 raised serious concerns regarding inflation and consumer affordability. The Indian government responded by taking a series of steps between February 2021 and August 2021 to mitigate rising prices. These included rationalizing import duty, amending import policies, and speeding up clearance of imported edible oil consignments​​​​​​.

Expected Benefits to Consumers: The duty cuts made so far are estimated to amount to Rs. 3500 crore in a full year. With the latest reduced import duty worth Rs. 1100 crore in a full year, the total direct value of benefits expected to be passed on to consumers is around Rs 4600 crore. This measure is anticipated to provide significant relief to consumers amid fluctuating global oil prices​​.

Conclusion: The Indian government's decision to extend the import duty reduction on edible oils reflects its commitment to ensuring food affordability and tackling inflation. This strategic move is likely to have a substantial impact on the domestic edible oil market, providing relief to consumers and stabilizing prices. As the global edible oil market continues to evolve, such policy interventions play a crucial role in maintaining the balance between affordability and availability.