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Current Affairs

Customs duty waiver on edible oil

Date: 19 October 2021 Tags: Agriculture

Issue

The union government has planned to waive customs duty on import of crude sunflower, palm and soyabean oil.

 

Background

The prices of edible oil are increasing in international market and the effect is felt on domestic consumers.

 

Details

  • The move is said to be aimed at controlling their prices. India is one of the largest consumers of edible oil and majority of it is imported.

  • The consumption of edible oil is only second to China. Palm oil is the largest consumed oil in domestic industries for frying purposes.

  • Palm oil is followed by Soybean oil and mustard oil. The rest is taken by sunflower oil, cottonseed oil, groundnut oil etc.

  • The food grade edible oil is imported in huge amounts from countries such as Indonesia, Malaysia, Brazil, Argentina etc.

 

Effects of import rates

  • Due to heavy dependence on imports, value in international market will have large effect on domestic prices. Home-grown oilseeds have little contributions.

  • The prices have increased steadily to reach Rs 130-190/lt. The upcoming festival season is expected to further increase the demand.

  • There are upcoming elections to states such as Goa, Uttar Pradesh, Uttarakhand, Punjab and Himachal Pradesh. The government would not want to face voters with high prices of commodity.

 

Measures

  • The government has abolished the basic customs duty on crude palm, soyabean and sunflower oil. The agri cess levied on these products has also been abolished.

  • The centre has also asked state governments to impose a stock limit on oilseeds and oil to control prices.

 

Impact

The price reduction may not have drastic changes on price. At most, consumers may see reduction of Rs 6-8/lt on final price.

 

Way ahead

  • The supply side constraints have not improved. Increase in production from countries such as Brazil, Indonesia, Ukraine, Malaysia is not expected to take place soon.

  • Decrease in import duties has reduced prices of domestic oil seeds. Farmers are expected to get discouraged due to lower prices.