The Cabinet Committee on Economic Affairs (CCEA) will consider on Thursday a proposal to raise import duty on refined edible oil to 10% from the current 7.5% to help domestic refiners, a senior government official said on Wednesday.
Last year, the food ministry also sought a rationalisation of the duty structure to protect domestic refiners, but the proposal was rejected by the CCEA due to fears of its impact on already elevated inflation, the official told FE.
However, this time round, the ministries of finance and commerce seem to back it, while the agriculture ministry feels the duty structure should be such so as to move in accordance with the movement of prices globally, he added.
The negative inflation in edible oils for a fifth straight month through November, compared with a 6.9% headline inflation during this period gives room for a duty hike, analysts said.
The latest proposal came after increased lobbying by the industry to widen the gap between the import duties on crude and refined oils. Solvent extractors have been seeking a hike in import duty on refined oils to at least 12.5%, arguing that the duty differential with crude vegetable oils is not large enough to discourage cheaper inflows of refined oils from overseas.
India, the world's largest edible oil buyer, imposed a 2.5% import duty on crude vegetable oils last year. However, since major exporters such as Indonesia and Malaysia offer duty incentives on supplies of refined edible oils to promote their local refiners, Indian buyers have cut down on purchases of crude edible oils and are increasingly opting for refined oils. India imports more than a half of its annual edible oil requirements.
In November, while refined oil imports shot up by 172% from a year before to 2,08,076 tonne, crude oil purchases from overseas were up by only 20% at 719,035 tonne.
The country's refined edible oil imports rose to 2.23 million tonne (mt) in the last marketing year through October, compared with 1.57 mt in 2011-12, while those of crude palm oil dropped to 5.88 mt in 2012-13 from 5.99 mt a year before. Total edible oil imports inched up to 10.39 mt in 2012-13, compared with 9.98 mt the previous year.