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Informist, Thursday, Jun. 12, 2025

 

MUMBAI – The recent decision by the Indian government to reduce import duty on various crude edible oils provides an opportunity for the US soybean sector, the USDA Foreign Agricultural Service said in its recent India Post. The decision is expected to increase India's imports of crude oils, which may benefit the US industry, it said.

 

"The tariff reduction is expected to increase crude oil imports, especially palm and soybean oil, presenting opportunities for the U.S. soybean sector," the USDA India Post said.

 

On May 30, India reduced import duty on crude soybean, sunflower, and palm oil from 20% to 10%. Effective immediately, Indian imports of crude soybean, sunflower, and palm oil saw an overall total import duty of 16.5%, down from the earlier 27.5%. The effective duty included Agriculture Infrastructure and Development Cess (AIDC) and Social Welfare Surcharge (SWS). The notification made no changes to the import duty on refined oils, keeping it unchanged at 32.5% with an effective import duty of 35.75%.

 

The policy is aimed at curbing high edible oil prices and inflation while encouraging imports of crude oil to boost domestic refining, it said.

 

Last year, India raised the duty on both crude and refined cooking oil by 20%. India meets more than 60% of its vegetable oil demand through imports.

 

Outlining India's edible oil sector, the post said India relies heavily on imported vegetable oil to meet domestic consumption needs, with over 60% of its demand filled by imports. Top suppliers include Indonesia (palm oil), Malaysia (palm oil), Argentina (soybean oil), Brazil (soybean oil), Russia (sunflower oil), and Ukraine (sunflower oil).

 

Further, the share of palm oil imports dropped significantly during the first half of the current marketing year 2024-25 which runs from October to September, due to increased Malaysian benchmark price. "Post anticipates that the reduced import duty will revive the import of palm oil to some extent. Relatedly, sunflower oil imports already saw a 30% rise in the current MY (marketing year) due to the benchmark palm oil price hike and it is expected to see a further rise."

 

"Soybean oil imports which were anticipated higher in the current year are likely to experience a further increase with the newly reduced duty. Although India's soybean oil market is dominated by Argentina, the reduced tariff can boost the import of U.S. soybean oil," it pointed out.

 

The post recalled that in 2022, India became the largest importer of US soybean oil since 1970, at a valuation of $291 million—representing an eightfold increase from the previous year's total of $34 million. The surge was driven by geopolitical tensions between Russia and Ukraine.

 

Specifically, sunflower oil exports to India were disrupted during the initial period of conflict. Additionally, drought in South America reduced soybean output which further constrained global soybean oil availability. Consequently, despite higher prices, Indian buyers shifted preference to US soybean oil.

 

"A similar rise in imports can be seen in the current MY. This is due to a multi-year low in prices that made U.S. soybean oil cheaper than palm oil. As a result, between October through April 2025, India imported $207 million worth of U.S. soybean oil equivalent to 198 MMT (million tonnes), already surpassing 72 percent of the total value and 97 percent of the total quantity imported in MY 2022. This trend is expected to continue due to the reduced import duty," it said.

 

Moreover, the post pointed out that Ukraine's sunflower seed acreage has been decreasing, largely due to the ongoing conflict in the region. Consequently, sunflower oil prices reached a three-year high in November 2024, resulting in a 16% increase for the current marketing year.

 

"Ukrainian sunflower oil is trading at a premium compared to Russian oil. This trend is expected to keep the Cost, Insurance, and Freight (CIF) price elevated through September 2025 at approximately $1,210 per metric ton (tonne). Additionally, Russian sunflower oil exports are anticipated to moderate, as the appreciation of the ruble diminishes their global price competitiveness. These market dynamics may lead Indian importers to shift their procurement preferences toward soybean oil as an alternative in the near future," it found.

 

The CIF price for soybean oil is projected at $1,050 for Brazilian and Argentinian origins, and $1,060 for US soybean oil – the price difference is too small to impact India's contracted demand.

 

In another related development, the government on May 28 raised the minimum support price for soybean, groundnut, and sunflower oilseeds for 2025-26. However, the current soybean minimum support price of INR 4,892 per 100 kg has been undermined by a recent drop in soybean prices to INR 4,200 per 100 kg, the post observed.

 

"Furthermore, a reduced acreage in soybean oilseed is expected because of crop diversification from soybean to corn, which is due to the rise in grain-based ethanol demand. Overall, the domestic soybean oilseed market is anticipated to experience a downfall. According to FAS sources, even with the increased MSP, the reduced import duty on edible oils is likely to discourage domestic soybean cultivation owning to reduced profitability," it said. End

 

US$1 = INR 85.59

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Abhijit Doshi

Edited by Deepshikha Bhardwaj

 

 

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