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On May 30, India reduced the effective import duty on crude edible oils, including palm, soybean and sunflower oil to a total of 16.5% from 27.5%. However, the duty reduction was not extended to refined oils, which remain at 35.75% | Photo Credit: SHENG LI
The Indian government’s recent duty cut on imported edible oils, intended to stabilise domestic prices, appears to be yielding only marginal relief. The positive impact is likely to be negated by rising global prices, with the Free-On-Board (FOB) price of crude soya oil increasing by $61/tonne and crude palm oil by $35/tonne since the May 30 announcement.
Industry sources indicate that the FOB (ex-Kandla) value of imported crude soybean oil reached $1,062/tonne on June 18, up from $1,001/tonne on May 30. Similarly, imported crude palm oil (CPO) rose to $1,030/tonne on June 18, compared to $995/tonne on May 30.
Experts attribute this surge to an increase in palm oil futures in Malaysia, aligning with higher soyaoil futures in the US. This trend is largely influenced by concerns over the Israel-Iran conflict and the anticipated diversion of more vegetable oil for biofuel blending programs globally.
On May 30, India reduced the effective import duty on crude edible oils, including palm, soybean and sunflower oil to a total of 16.5 per cent from 27.5 per cent. However, the duty reduction was not extended to refined oils, which remain at 35.75 per cent, despite industry calls for a wider gap (minimum 20 per cent) between crude and refined oil duties.
According to a recent data from the Consumer Affairs Ministry, retail prices of vanaspati, soya oil, sunflower oil, and palm oil have seen a modest decrease of 0.4 per cent to 2.1 per cent in the 20 days following the duty cut. In contrast, retail rates for groundnut oil and mustard oil, primarily influenced by domestic factors, have slightly risen by 0.4 per cent each.
At the wholesale level, groundnut oil prices remained stable, while mustard oil recorded a 1 per cent increase over the same 20-day period. Meanwhile, wholesale prices for vanaspati, soya oil, sunflower oil, and palm oil declined by 0.5 per cent to 2.4 per cent.
On June 11, Sanjeev Chopra, Secretary in the Department of Food and Public Distribution (DoFPD), met with leading edible oil industry associations and manufacturers. He urged them to immediately pass on the benefits of the duty reduction to consumers. Associations were instructed to advise their members to implement immediate price reductions and provide weekly updates on brand-wise MRP sheets to the Department in a prescribed format.
Sources indicated that representatives from major edible oil companies assured the government of their compliance. However, an industry source expressed reservations about the long-term efficacy, stating, “The government must understand that edible oil prices are never static; they fluctuate based on global prices, which are determined outside India and influenced by various factors, including geopolitical tensions.” This source also questioned the timing of the duty cut.
Another industry expert added, “In the past, even when import duty was zero, edible oil prices increased. Therefore, assuming that a duty cut is the sole solution is inaccurate. It must be considered within the context of domestic oilseeds production. If officials concerned with inflation are not fully aware of these realities, there should be more comprehensive deliberations within the government.” The expert emphasised that no company would operate at a loss by selling below imported rates, regardless of government pressure.
Despite the recent duty cut, retail inflation for oil and fats, which accounts for a 3.56 weight in the Consumer Price Index (CPI), registered a substantial 17.91 per cent increase in May 2025, a sharp contrast to the (-)6.71 per cent recorded a year prior.
Specific inflation figures for May 2025 include: mustard oil (19.61 per cent), groundnut oil (-1.77 per cent), coconut oil (78.04 per cent), refined oil (sunflower, soybean, safflower) (24.27 per cent), and vanaspati (21.32 per cent).
Experts acknowledge that while the percentage hike in inflation from the previous year might appear high, it’s crucial to assess it in relation to the absolute prices of commonly used edible oils. They suggest that these absolute prices are not excessively high when compared to the raw material cost of oilseeds and other essential food items.
Published on June 19, 2025
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