Government cuts agri cess on crude palm oil

The Union government has decided to reduce the agricultural infrastructure development cess (AIDC) on crude palm oil (CPO) to 5 per cent effective from February 13 from the current 7.5 per cent which will help it to widen the gap between crude and refined oil. After this reduction, the effective gap will be 8.5 per cent between CPO and RBD palmolein.

In a notification issued on Saturday, the Finance Ministry has also extended the validity of the new duty on CPO and other crude oils to September 30. The effective duty on these crude edible oils will be 5.5 per cent.

“This is a welcome step but not enough to support domestic refiners. We had requested to create duty difference minimum 11 per cent to enable domestic refiners to operate refinery economically,” said B V Mehta, executive director of Mumbai-based Solvent Extractors’ Association of India (SEA).

On December 20, the Centre had lowered import duty on RBD palmolein and RBD palm oil by 5.5 per cent as a result the gap between refined varieties and crude had narrowed down. The SEA had sought a reduction in AIDC on CPO from 7.5 per cent to 2.5 per cent. While such a reduction would not have escalated the domestic prices of cooking oils, it could have helped the industry to save their investment, SEA had argued.

In a letter to the Union Food Secretary Sudhanshu Pandey last month, SEA President Atul Chaturvedi had urged that RBD palmolein and refined palm oil be placed under the “restricted list” to save the domestic palm oil refining industry.

The Food Ministry, on February 3, had notified the order imposing stock limit on edible oils and oilseeds making it mandatory for States to implement it. The Centre also extended the validity of the stock limits until June 30, which was to expire on March 31. The earlier order issued on October 8 had empowered States to impose the stock limits and only Uttar Pradesh, Karnataka, Himachal Pradesh, Telangana, Rajasthan and Bihar had imposed the quantitative restriction.

The Centre has asked States to implement the stock limit order on edible oils and oilseeds without causing any disruption in the supply chain and impacting the trade. The stock limit is expected to curtail any unfair practices like hoarding, black marketing and is seen as a measure to prevent further increase in the prices of edible oils.

Indian consumers can expect little relief from high edible oil prices at least until May as a combination of factors such as labour shortage in South-East Asia oil palm plantations, surging crude oil prices and dry weather in South America will keep them elevated. These factors have resulted in palm oil prices zooming to record highs this year, gaining 20 per cent, while soyabean oil has increased by over 15 per cent.

COMMENT NOW