Dubai: India, the world’s biggest buyer of vegetable oil after China, may cut import duties by more than 10% as record high global prices fan inflation, the country’s largest importer said.
Taxes on palm oil and soya bean oil could be reduced or state-owned trading companies may increase overseas purchases as the government struggles to rein in food prices before elections, Dinesh Shahra, managing director of Ruchi Soya Industries Ltd, said in Mumbai.
“A cut of 5-10% will make no difference to inflation,” Shahra said. “If they are serious about bringing prices lower, they have to do more than that.”
The government reduced the levy on vegetable oils four times last year to the lowest since at least 2000, joining China, Malaysia and Thailand in safeguarding food supplies. Palm oil and soya bean oil surged to records this month, complicating efforts by Prime Minister Manmohan Singh’s government to curb prices of staple foods as India imports more than half its cooking oil needs.
“Inflation is a concern for the government and it is an election year,” Shahra said.
Singh’s Congress party lost ground in most state polls last year because of rising consumer prices. The government, which faces elections before May 2009, last month announced a Rs60,000 crore loan waiver for farmers to boost its electoral chances.
State-owned trading company MMTC Ltd last week called bids to import as much as 40,000 tonnes of crude soya bean oil and 6,000 tonnes of crude palm oil for April-May delivery.
China’s National Development and Reform Commission, the state planning agency, on Monday asked regional governments to increase sales from their vegetable oil reserves to curb food prices.
“Government-run agencies may import edible oils and supply it to refiners or distribute through ration shops, something that China is doing,” Shahra said.
The government charges 40% import duty on crude palm oil, down from 60% at the beginning of last year. Tax on imports of crude soya bean oil was lowered to 40% from 51% in 2007.
The government may cut import duties on vegetable oils or raise imports through state-run agencies, T. Nanda Kumar, Union food secretary had said in Dubai on 5 February.
Finance minister Palaniappan Chidambaram had been expected to announce the duty cuts in his annual Budget speech on 29 February, Shahra said.
“Since the Budget had no announcement on that, the government could be expected to act as soon as possible,” Shahra said.
India’s cooking oil purchases may climb 15% to 5.4 million tonnes in the year to 31 October, according to a Bloomberg survey in January.
Imports in January climbed 46% from a year ago to 457,601 tonnes, a trade body said last month. Palm oil futures in Malaysia, the global benchmark, rose as much as 5.6% to 3,870 ringgit (about Rs49,000) on Tuesday.