New Delhi: India has raised import taxes on crude and refined vegetable oils by 5 percentage points, government and trade sources said, as the world’s largest buyer seeks to curb surging supplies from Malaysia and Indonesia.

The cost of the edible oils imports are expected to rise about 40% to $14 billion this fiscal year from about $10 billion, driving several Indian mills out of business and forcing some farmers to switch to crops other than oilseeds such as soybeans.

The tax on crude vegetable oils has been hiked to 12.5% from 7.5%, and on refined oils to 20% from 15%, the sources said ahead of an announcement expected later on Friday.

“We welcome the step but the government should have increased the duties by at least 10 percent(age points)," said B.V. Mehta, executive director of trade body the Solvent Extractors Association of India.

Mehta said the government should have also raised the duty differential between crude and refined edible oils to protect Indian farmers and the refining industry from rising imports.

Malaysian palm oil prices have been trading near 6-1/2-year lows, boosting India’s imports and undermining Prime Minister Narendra Modi’s efforts to make the country self-sufficient in vegetable oils this decade.

Edible oil is the third-highest item on India’s import bill after petroleum oil and gold.

Massive imports have driven down Indian soybean prices by about 20% in the past four months, discouraging farmers from expanding oilseed planting. Still, local soyoil is still much costlier than imported palm oil.

In the past 20 years, India’s edible oil output has risen only about a third.

Imports of vegetable oils, however, have surged twelvefold to 14.4 million tonnes to keep pace with growing consumption, making India the world’s top buyer of cooking oils.

Shares of Ruchi Soya, India’s biggest edible oil refiner, rose as much as 7% after the report. Reuters