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The Indian government is contemplating a hike in import duties on palm and soybean oils to protect domestic farmers and ensure they receive the minimum support price for their crops. With current import duties set at 5.5% for crude oils and 13.75% for refined oils, a significant policy change may be on the horizon, especially as the rabi sowing season approaches.

Highlights

Agriculture Ministry's Suggestion on Import Duties: The Agriculture Ministry of India has proposed increasing import duties on edible oils such as palm and soybean to protect domestic farmers, ensuring they receive at least the minimum support price (MSP) for their crops. A decision is expected soon.

Current Import Duties on Edible Oils: At present, India imposes a 5.5% duty on crude palm, soybean, and sunflower oils, while refined edible oils have a duty of 13.75%. There is a rare zero-duty rate on crude edible oil imports, which industry officials suggest should be raised.

Food Ministry's Support for Duty Hike: The Food Ministry is supportive of increasing import duties to encourage the cultivation of oilseeds, particularly ahead of the rabi sowing season when mustard, India’s largest oilseed crop, is planted.

Decision-Making by the Committee of Ministers: A final decision regarding the import duty hike will be taken by a committee of ministers, chaired by Cooperation Minister Amit Shah. The Agriculture Ministry has indicated that the import price should not undercut the cost of domestically processed edible oils.

Industry Disappointment Over Lack of Import Duty Hike: Ajay Jhunjhunwala, President of the Solvent Extractors’ Association of India, expressed disappointment over the absence of any import duty hike in the recent Budget, arguing that higher duties are needed to support domestic oilseed farmers.

Current Market Prices for Soybean and Groundnut: Freshly harvested soybean is selling below its MSP, at ?4,150/quintal in Madhya Pradesh and ?4,185/quintal in Maharashtra, compared to the MSP of ?4,892/quintal. Groundnut prices are also below the MSP of ?6,783/quintal.

Retail Prices of Edible Oils: Data from the Consumer Affairs Ministry indicates that during August 1-25, the average retail prices were ?123/litre for soybean oil, ?145/litre for mustard oil, ?102/litre for palm oil, ?187/litre for groundnut oil, and ?131/litre for sunflower oil. These prices are lower compared to the same period last year.

Conclusion

The proposed increase in import duties on edible oils aims to safeguard domestic farmers by making imported oils less competitive, thereby encouraging the growth of oilseeds within the country. This move is particularly crucial as current market prices for crops like soybean and groundnut are below their respective MSPs, leading to concerns about farmer income and production incentives. As a decision looms, the industry anticipates that a duty hike could foster a more sustainable and self-reliant domestic edible oil sector.

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