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Informist, Wednesday, Sep 25, 2024

 

MUMBAI – The government's move to increase the import duties on key edible oils, such as palm oil, soyoil and sunflower oil, is unlikely to impact the quantum of the import but will push up the prices in the domestic markets, India Ratings and Research said in a release. The country meets 57-60% of domestic requirement of edible oil through imports.

 

After over 2.5 years, the government raised the basic customs duty on crude soyoil, crude sunflower oil and crude palm oils to 20% from 0% with the effect from Sep 14, taking the effective duty on crude oils to 27.5% from 5.5?rlier.

 

The hike in the customs duty would increase the cost of importing edible oil by around 20%, which is likely to be passed on by companies, leading to an increase in the selling prices, the release said. As a result of this, edible oil players possessing sizeable unhedged stocks could see a temporary inventory gain in the second half of the financial year 2025, it said.  

 

Recently, crude palm oil prices are higher than soft oils including soyoil and sunflower oil, against the long-term trends of soft oils moving at a premium. The increase in palm oil prices would also increase the production cost of various fast-moving consumer goods products. In the coming festival season, palm oil demand is likely to sustain. Palm imports will remain high at 9.0-9.3 mln tn in the oil year 2023-24 (Nov-Oct).

 

The government of India under the National Mission for Edible Oils - Oil Palm aims to promote palm oil cultivation in northeastern states to increase the production to 1.1 mln tn by 2025-26. Despite the hike in import duties, the agency believes the overall edible oil imports will remain at 16.0-16.2 mln tn in oil year 2023-24, the release said.

 

"However, with Indonesia slashing its palm oil export duty by 30% with effect from Sep 22, international crude palm oil prices could soften till the reduced duty sustains and cushions the impact of the duty hike on domestic prices," the release said, quoting Khushbu Lakhotia, director at India Ratings and Research. Indonesia accounts for 57% of India's palm oil imports. This move could soften international crude palm oil prices, which are marginally higher than soyoil and almost at par with sunflower oil. 

 

"With imports becoming costlier after the duty hike, India Ratings and Research expects domestic oilseed prices to increase too," the report said.  End

 

Reported by Anjali Lavania

Edited by Akul Nishant Akhoury

 

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