Govt directs edible oil associations to maintain MRP amid customs duty hike

New Delhi: Worried over a rise in edible oil prices during the festive season, the government directed edible oil associations on Tuesday to maintain the maximum retail price (MRP) of oils until stocks imported at lower basic customs duty (BCD) are exhausted.

This directive follows a significant increase in BCD on various edible oils, aiming to support local agriculture and stabilize domestic markets.

Basic customs duty refers to a tax on imported goods to protect domestic industries by making imports more expensive.

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The decision comes after considering several factors such as more global production and higher stock of oilseeds, plus lower global prices.

“This has increased imports of cheaper oils, lowering domestic prices. By raising the cost of imported oils, the government hopes to raise local oilseed prices, support local production, and give fair pay to farmers," it said.

Close watch on stock

The government is also keeping a close watch on imported oils stocks.

"There is close to 3 million metric tonnes of edible oils imported at lower duty, which is sufficient to meet domestic consumption for 45 to 50 days,” it said.

“The decision was made after a crucial meeting with representatives from the Solvent Extraction Association of India, Indian Vegetable Oil Producers’ Association, and Soybean Oil Producers Association," a government press note released by consumer affairs and food distribution ministry stated on Tuesday.

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The government’s directive requires these associations to ensure that current retail prices remain unchanged during the transition period when imported oil stocks, subject to 0% and 12.5% BCD, are still available, it said.

As per the Consumer Affairs Ministry, the average retail price of groundnut oil was ₹182.72 per kg on 17 September. Similarly, the retail price was ₹145 per kg for mustard oil, ₹122 per kg for soybean oil, ₹122 per kg for sunflower oil, and ₹103 per kg for palm oil.

In wake of price reductions

This policy shift comes in the wake of recent price reductions for oils such as sunflower, soybean and mustard, which were initially implemented in response to lower international prices and decreased import duties.

These reductions provided some relief to consumers but also placed pressure on domestic oilseed prices, which the government now aims to support through increased import duties.

Effective from 14 September, the BCD on crude soybean oil, crude palm oil, and crude sunflower oil has been hiked from 0% to 20%, resulting in an effective duty rate of 27.5% on crude oils, the government release said.

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Similarly, the BCD on refined palm oil, refined sunflower oil, and refined soybean oil has been raised from 12.5% to 32.5%, with an effective duty rate of 35.75% on refined oils, it said

The government's move is influenced by recent global trends, increased production of oilseeds like soybean and oil palm, and a rise in global ending stocks have led to a surge in imports of cheaper oils.

This influx has driven down domestic prices, prompting the government to adjust duties to safeguard local farmers' incomes.

“From a broader perspective, this policy adjustment reflects the government's ongoing efforts to balance consumer interests with agricultural sustainability,” said B.B. Singh, a former official of Indian Council of Agriculture Research.