India Increases Import Tax on Edible Oils to Support Domestic Farmers by Amit Gupta, Kedia Advisory
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India has raised the basic import tax on crude and refined edible oils by 20 percentage points to support local farmers facing lower oilseed prices. The new tax will increase the total import duty on crude palm oil, soyoil, and sunflower oil to 27.5%, up from 5.5%, while refined oils will now attract 35.75% duty, up from 13.75%. The move is expected to raise domestic edible oil prices, dampen demand, and reduce India’s reliance on overseas imports, particularly from Indonesia, Malaysia, Brazil, and Argentina. Following the announcement, soyoil futures on the Chicago Board of Trade dropped over 2%, reflecting reduced demand expectations from India, the world's largest edible oil importer.
Key Highlights
* India raised basic customs duty on crude and refined edible oils by 20%.
* Total import duty on crude oils increased to 27.5% from 5.5%.
* Refined oils will now attract 35.75% import duty, up from 13.75%.
* Chicago soyoil futures fell over 2% after the announcement.
* India imports over 70% of its vegetable oil demand from overseas.
India has sharply increased the basic customs duty on crude and refined edible oils by 20 percentage points, effective from September 14, in an effort to support its domestic farmers. This move aims to stabilize the oilseed market, as local farmers are struggling with declining oilseed prices. The higher import duties are expected to increase domestic prices of edible oils, potentially reducing demand and, consequently, India's dependency on overseas purchases of palm oil, soyoil, and sunflower oil.
The total import duty on crude palm oil, soyoil, and sunflower oil will now be 27.5%, up from the previous 5.5%. Refined versions of these oils will be subject to a 35.75% import duty, a significant increase from the earlier 13.75%. India, which meets over 70% of its vegetable oil needs through imports, primarily buys palm oil from Indonesia, Malaysia, and Thailand, and soyoil and sunflower oil from Argentina, Brazil, Russia, and Ukraine.
Following the duty hike, global market reactions were quick. The Chicago Board of Trade soyoil futures saw a decline of more than 2%, reflecting the market’s response to lower expected demand from India, the world’s largest edible oil importer.
Finally
The import tax increase is expected to boost local oilseed prices, helping farmers, while also reducing India's dependence on imported edible oils.
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