As retail inflation for edible “oils and fats” reached the second highest level in 2021 in September, the government on Wednesday reduced the agricultural tax on imported oils to 5% and 7.5%. % on various items versus 20% previously, while removing 2.5% from base. import duty.
However, the tariff cut may not bring much relief to consumers, despite the government losing around Rs 34,000 crore, analysts said, pointing to the increase in palm oil prices on Wednesday. in Malaysia.
“Consumers may not take full advantage of reduced tariffs. In fact, after the announcement of the tariff reduction by India, the Malaysian market grew by around RM 150-170 per tonne, ”said BV Mehta, executive director of the Solvent Extractors Association of India.
Wednesday’s announcement will result in a reduction in effective import duties on crude and refined varieties of palm, soybean and sunflower oil to between 16.5 and 19.25 percentage points. The drop will be effective from October 14. Consumer price inflation (CPI) for oils and fats jumped 34.19% in September, slightly below June’s 34.78%. The government has realized that the situation may not improve until the next rabi oilseed crops arrive, as there is likely to be a drop in production of two main kharif oilseeds – soybeans. and cotton.
“There has been a demand for edible oils, globally, as many countries are expected to switch to biodiesel. In addition, the prices of other commodities are also bullish this year compared to last year, ”said RK Patel, an edible oil expert who trades peanut oil.
“The immediate trigger for this drastic reduction in tariffs is largely due to the high price of edible oil, the start of the holiday season and high food inflation. However, the timing of the import tariff reduction is cause for concern as farmers are now harvesting the soybean and kharif peanut crops. This reduction in import duties may affect farmers’ achievement for their oilseeds, ”Mehta said.
However, Abhishek Jain, Fiscal Partner, EY, said: “In light of soaring prices for edible oils, the government has reduced the base tariff rates on crude and edible oils. The decision would be highly appreciated by the industry and would also help reduce the price burden on end consumers. “