Lower palm oil tariffs may not lower domestic prices

New Delhi: The reduction in import duties on crude and refined palm oil until September 30, a measure aimed at reducing the spike in edible oil prices in the domestic market, is expected to have a limited effect on prices, the companies said.

On Tuesday, the government announced several measures to stop high prices for edible oils, including cutting basic import duties on crude palm oil from 15% to 10% and refined palm oils from 45% to 37.5%. The reduction will lower the effective tax rate on crude palm oil to 30.25% from 35.75%. This reduction, in turn, will lower retail prices for edible oils, the government said.

In addition, the Food and Public Distribution Department recommended on June 30 to remove refined, bleached and deodorized palm oil and RBD palmolein from the restricted list to the free import category until the 31st. December.

Food inflation, including high prices for edible oils, has been a source of concern for the government and the central bank.

Adani Wilmar, who sells edible oil under the Fortune brand, said lowering tariffs would not help much lower prices.

“Suppliers can increase their prices, so you don’t get the full benefit of the tariff reduction,” said Angshu Mallick, deputy general manager of Adani Wilmar. increase, the consumer will not be relieved because of it. “

In addition, the duty was reduced on palm oil and not on soybean or sunflower oil, which middle-class Indians use widely. Palm oil is mainly used by institutions, hotels and commercial establishments, he said.

Almost 60% of the country’s edible oil consumption is satisfied by imports.

The import of palm oil, both crude and refined, accounts for around 60% of the total edible oil imported by India, of which 54% is imported from Indonesia and Malaysia.

Palm and soybean oil prices have more than doubled in the past year, S&P Global Platts said in a recent memo.

Palm oil is widely used in a range of everyday items such as soaps, cosmetics, and packaged foods such as cookies, crisps, and chocolates.

Pankaj Agarwal, chief operating officer of snack maker Bikano, said the tariff cuts offered a slight boost to the food industry.

However, despite these tariff cuts, raw material prices remain very high. “As such, these cuts are still not a relief, with high prices still putting us under pressure in these difficult times, but could help companies reduce their cash losses,” he added.

“Since edible oil is an integral part of almost all food preparations, the reduction in import duties on palm oil would naturally have an impact on the prices of edible oil, lowering the prices of the latter. on the market. However, with the prevalence of high commodity prices, the industry has been bleeding for some time now. Despite these tariff cuts, prices remain commercially high, ”he said.

Mallick d’Adani added that unrestricted imports of refined palmolein should open the “floodgates” for finished products in the country and hurt domestic manufacturers.

Shuchi Bansal contributed to this story.

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