Retail prices of cooking oil are expected to fall ahead of the festive season as the government has decided to cut import duties on soybean, palm and sunflower oils. However, the extent of its direct impact will depend on several factors, including international prices, the movement of the rupee and domestic supply. The government has reduced the basic customs duty (BCD) on crude sunflower oil from 10 per cent to nil. The government has trimmed the BCD on refined sunflower oil from 32.5 per cent to 22.5 per cent. The BCD on crude soybean oil and palm oil has been slashed from 10 per cent to 5 per cent, and on refined soybean oil and palm oil from 32.5 per cent to 27.5 per cent. The development is significant as India meets around 60 per cent of its total edible oil requirements through imports.
Demand for oil increases during festivals
Demand for edible oil increases during the festival seasons not only in homes but also in sweets, snacks, restaurants, and food service businesses. At such a time, this government decision could help reduce the cost of imported oil.ย
According to Sudhakar Desai, President of the Indian Vegetable Oil Producers Association (IVPA), the lower import duty could reduce the landed cost of imported oil, likely providing some relief to consumers. He also said a significant reduction in duty on sunflower oil could affect prices, especially in South India.
60% of India’s needs are met through imports
India meets approximately 60 per cent of its total edible oil needs through imports. As a result, domestic oil prices are influenced by international market conditions, the rupee exchange rate, freight costs, and available stocks. India primarily imports palm oil from Malaysia and Indonesia and soybean oil from Argentina and Brazil. As a result, changes in global market prices are passed on to domestic consumers.
How much relief will there be in prices?
The government’s decision is expected to lower oil prices, but it doesn’t mean that all oil in the market will immediately become cheaper. According to the IVPA, international commodity prices, freight charges, the rupee’s value, domestic availability, and company stocks will also shape the final retail price.
According to the industry body SEA, India’s edible oil import bill is estimated to rise 9 per cent to Rs 1.75 lakh crore during the current marketing year ending October, driven by higher volumes and rupee depreciation.
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