According to government and industry officials, India has put on hold a proposal to cut down import duties on edible oils, even as cooking oil prices started to fall in the world market after hitting record highs.
"We are not cutting import duties now, a more longer term solution has to be found. Cutting duties is not a sustainable solution," said a government official with knowledge of the matter asking anonymity.
"The idea (to leave the import duty structure unchanged) is to keep a close watch on international prices and global supplies, and if the situation warrants it, we’ll revive the proposal for a reduction in the duty to protect the interests of both consumers and farmers," said another official, also requesting anonymity.
Almost two-thirds of India’s edible oil demand is met through imports, levying a 32.5 percent duty on palm oil imports, while crude soybean and soyoil are taxed at 35 percent. It buys palm oil from Indonesia and Malaysia, and soyoil and sunflower oil come from Argentina, Brazil, Ukraine and Russia.
Aside from reducing government revenues, any reduction in import duty could give overseas suppliers an opportunity to raise prices, as palm oil exporters have done in the past, which in the words of the first official “should not be repeated”.
Consumption of edible oils in households is expected to decline eventually if the prices remain high for too long. As for the demand from restaurants, hotels and bakeries are already dropped due to the second wave lockdown.
With the onset of monsoon, Indian farmers have started sowing soybean and groundnut in southern and western parts of the country.
“We told government this is not the right time to cut taxes. Farmers have started soybean and groundnut sowing. The duty cut would give them a wrong signal," said a senior industry official.