The Commerce Ministry has sought lower import duty on oilseeds in the forthcoming Budget (2016-17) to bring it below the duties imposed on crude and refined edible oil.

Its argument is that the present duty structure “disincentivises” domestic production of edible oil.

“The higher duty on import of oilseeds compared to edible oil creates an inverted duty structure. We have been pursuing the matter with the Finance Ministry for some time and the anomaly in the duty structure should be corrected in this Budget if domestic manufacturing is to be encouraged,” a Commerce Ministry official told BusinessLine.

Oilseeds, including soybean, sunflower and rapeseed, attract an import duty of 30 per cent, while the import duties on refined oil and crude oil are 20 per cent and 12.5 per cent respectively. In its recommendation to the Finance Ministry, the Commerce Ministry has proposed that import duty on the primary product should be brought down to 10 per cent or less.

While the logic behind maintaining high duties on oilseeds is the possible adverse impact that lowering of duties may have on farmers, the industry argues that the minimum support price extended by the government to farmers would prevent them from suffering losses.

According to the Solvent Extractors’ Association (SEA), there has been a sharp decline in the capacity utilisation of domestic refiners over the years as importing edible oil is a cheaper proposition than importing oilseeds because of the anomalous duties.

While many refiners have shut shop due to cheaper import of edible oil, most are operating below 40 per cent of capacity. Latest estimates by SEA indicate that edible oil imports could rise as much as 11 per cent to a record 16 million tonnes in the 2015-16 marketing year which started on November 1.

The country had imported a record 14.4 million tonnes the previous year.

India imports three-fourths of the total edible oil consumed and buys mainly from Indonesia, Malaysia, Argentina and Brazil.

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