India hikes import duty on edible oils by 5%

The union government has raised the import tax on crude edible oils and refined oils by 5 percentage points each to protect local farmers from rising imports from Malaysia and Indonesia.

In an order made public on Christmas day, it said the import tax on the crude variety of vegetable oil would rise to 7.5 per cent from 2.5 per cent, while that on refined oil would rise to 15 from 10 per cent with immediate effect.

India is the world's biggest vegetable oil importer. It meets nearly 60 per cent of its 18-19 million tonnes of annual demand from overseas, mostly in the form of palm oil from top producers Indonesia and Malaysia.

The increase in import duties is expected to hit Malaysian palm oil futures, the regional benchmark.

Hit by cheaper vegetable oil imports from Malaysia and Indonesia, industry body the Solvent Extractors Association of India (SEA) had petitioned the government to raise the import duty on crude vegetable oils to 10 per cent and 25 per cent on refined products.

B V Mehta, executive director at the SEA, welcomed the government's move, but said it was not enough to safeguard the local producers.

"The government should have ensured at least 15 per cent of duty differential between crude and refined oils to help the local industry," he said.

Both palm oil exporters Indonesia and Malaysia will soon calibrate their export duties to encourage exports of refined oils at the expense of the Indian refiners, Mehta said.

In the year that began in November, India is likely to import a record 13 million tonnes of edible oils, up from an estimated 11.6 million tonnes, including 8 million tonnes of palm oil, the previous year, a leading importer told Reuters in September.