Centre Reduces Basic Customs Duty on Major Imported Crude Edible Oils
The Indian government has announced a significant reduction in the Basic Customs Duty (BCD) on crude edible oils, including sunflower, soybean, and palm oils, cutting it from 20% to 10%. This move aims to alleviate the rising prices of edible oils, which have surged due to previous duty hikes and increasing international market rates. The adjustment is expected to benefit consumers by lowering retail prices and enhancing domestic refining capabilities.
Impact on Edible Oil Prices
The reduction in import duty is designed to address the escalating costs of edible oils that have affected consumers in recent months. Following a duty hike in September 2024, retail prices of edible oils soared, contributing to overall food inflation. By lowering the import duty on crude oils, the government aims to decrease the landed cost of these products, ultimately leading to lower retail prices. This change is crucial for providing relief to consumers who have been burdened by high food prices.
The new duty structure creates a significant differential of 19.25% between crude and refined oils. This differential is intended to encourage domestic refining operations while reducing reliance on imported refined oils. By promoting the use of crude oils, the government hopes to strengthen the domestic refining sector and ensure fair compensation for local farmers.
Advisory to Industry Stakeholders
In light of this duty reduction, the government has issued an advisory to edible oil associations and industry stakeholders. They are urged to pass on the benefits of the reduced duty to consumers promptly. A meeting chaired by the Secretary of the Department of Food and Public Distribution emphasized the importance of adjusting the Price to Distributors (PTD) and Maximum Retail Price (MRP) in line with the new landed costs.
Industry stakeholders are expected to implement immediate price reductions and share updated MRP sheets with the government on a weekly basis. This proactive approach aims to ensure that consumers experience a corresponding decrease in retail prices as soon as possible. The timely transmission of these benefits through the supply chain is essential for achieving the desired impact on consumer prices.
Strengthening Domestic Refining Capacity
The revised duty structure is also a strategic move to bolster domestic refining capacity. By discouraging the import of refined Palmolein and redirecting demand towards crude edible oils, particularly crude palm oil, the government aims to revitalize the domestic refining sector. This policy intervention not only supports local refiners but also contributes to stabilizing edible oil prices for Indian consumers.
The governmentโs decision follows a thorough review of the sharp rise in edible oil prices after last year’s duty hike. The increase in prices has placed significant inflationary pressure on consumers, making it imperative for the government to take action. By lowering the import duty, the government seeks to mitigate these pressures and ensure a more stable market for edible oils.
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