The government on Monday cut the basic customs duty on refined palm oil to 12.5 per cent from 17.5 per cent as part of efforts to increase domestic supplies and bring down the retail prices of the cooking oil.
The revised Basic Customs Duty (BCD) will be effective till the end of March 2022. The latest move also comes on a day when the government decided to allow traders to import refined palm oil without licence for one more year till December 2022 and markets regulator banned launch of new derivative contracts of crude palm oil and a few other agricultural commodities.
All these measures have been put in place at a time when inflation is ruling high. The Central Board of Indirect Taxes and Customs (CBIC) has issued a notification which "seeks to reduce BCD on refined palm oil and its fractions from 17.5 per cent to 12.5 per cent till March 31, 2022".
The new rate is effective from Tuesday. With reduction in the duty, the effective levy on both refined palm oil and pamoline will come down to 13.75 per cent, including social welfare cess, from 19.25 per cent, according to Solvent Extractors' Association of India (SEA) Executive Director B V Mehta.
On Monday, the average retail prices of groundnut oil stood at Rs 181.48 per kg, mustard oil at Rs 187.43 per kg, vanaspati at Rs 138.5 per kg, soyabean oil at Rs 150.78 per kg, sunflower oil at Rs 163.18 per kg and palm oil at Rs 129.94 per kg, as per the data available with the consumer affairs ministry.
On the duty cut, Mehta said imports of refined palm oil will increase as duty difference with Crude Palm Oil (CPO) has come down to only 5.5 per cent. The current effective duty on CPO is 8.25 per cent. Earlier in the day, Finance Minister Nirmala Sitharaman told the Lok Sabha, "we will attend to the problem of edible oil price and also some of the essential edible items".
In order to rein in the prices of edible oil, the government has cut import duties on both refined and crude edible oils several times this year. The last reduction on import duty was done by the government on October 14.
Mehta also said the cut in duty will hurt domestic palm oil refineries. Earlier in the day, the commerce ministry said traders will be allowed to import 'refined bleached deodoerised palm oil' and 'refined bleached deoderised palmolein' without licence for one more year till December 2022.
According to the SEA, India's dependence on import of edible oils is nearly 65 per cent of the total consumption of about 22-22.5 million tonne. The country imports 13-15 million tonne to bridge the gap between demand and domestic supply. For the last two marketing years (November to October), due to the pandemic, the imported quantity reduced to nearly 13 million tonne.