The Finance Ministry has upped tariff value for the second time in the current month for edible oils. Experts say with this rise, the impact of import duty cut has been negated, while domestic firms say this will be good for the farmers. Meanwhile, the data from the Consumer Affairs Ministry show that prices of edible oils are still on the rise.
According to a gazette notification, tariff value for all types of edible oils has been raised between $18 a tonne and $38 a tonne. Tariff values refer to the base on which ad valorem (percentage of value) duty is calculated for an imported good. Change or no change in the value is notified every fortnight, keeping in mind the prices in the international market.
Sub-section (2) of Section 14 of the Customs Act, 1962, empowers the Central Board of Indirect Taxes & Customs (CBIC) “to fix tariff values for any class of imported goods or export goods and the duty shall be chargeable with reference to such tariff value.”
BV Mehta, Executive Director of Solvent Extractors Association of India, said that tariff value has gone up due to an increase in global prices. “This increase has negated the impact of cut in import duty,” he said.
Earlier this month, the CBIC, effected import levies reduction between 16.5 per cent and 19.25 per cent on crude, refined palm oil, soyabean oil and sunflower oil. This is the third reduction in recent months and the immediate trigger was higher prices, especially during the festive season. It was said that with the latest round of cut, prices of edible oils might come down by ₹6-8 a kg. However, data from the Consumer Affairs Ministry prove otherwise. In fact, despite the cuts, the price of mustard oil has been on a steady rise. In just one month between September 29 and October 29, mustard oil went up from ₹183.78 to ₹186.99.
Meanwhile, domestic producers have a different perspective. Akshay Modi, Joint Managing Director with Modi Naturals Ltd, said that tariff value is used to ascertain the assessable value of oils for import duty calculation, and it tends to go up or down in line with the international prices. The government has no control. However, the government has already reduced the net import duty on oils itself to 5.5 per cent on crude soybean and sunflower oils, and to 8.25 per cent on crude palm oil.
‘Reduce import dependence’
Therefore, Modi said, the increase in tariff value has a marginal impact on prices.
For example, if the tariff value goes up by 2 per cent, the duty impact of that works out to only 5.5 per cent of 2 per cent, i.e. 0.11 per cent. “At the moment, for any major price movement, we have to watch international price trends and at the same time hope for a good and timely domestic kharif oilseed harvest, which should pick up after Diwali,” he said. Similarly, an increase in tariff value does not make much difference to domestic manufacturers at this low duty level.
“What does make a difference is that at these price levels of edible oil, Indian farmers will be motivated to sow more oilseed in the forthcoming Rabi and Kharif crops. Hence, there is expected to be better availability of oilseed in the domestic market and, in turn, help reduce our dependence on imports,” Modi added.