The Union Commerce Minister has announced that the government has decided to waive customs duty on import of crude sunflower, palm and soyabean oil, a move aimed at controlling their prices.

Edible Oil Imports and India

• Given the heavy dependency on imports, the Indian edible oil market is influenced by the international markets.
• Of the 20-21 million tonnes of edible oil that India consumes annually, around 4-15 mt is imported.
• India is second only to China (34-35 mt) in terms of consumption of edible oil.
• Crude and food-grade refined oil is imported in large vessels, mainly from Malaysia, Brazil, Argentina, Indonesia etc.
• Home-grown oilseeds such as soyabean, groundnut, mustard, cottonseed etc find their way to domestic solvent and expellers plants, where both the oil and the protein-rich component is extracted.

Do you know?

Palm oil (45%) is the largest consumed oil, mainly used by the food industry for frying namkeen, mithai, etc, followed by soyabean oil (20%) and mustard oil (10%), with the rest accounted for by sunflower oil, cottonseed oil, groundnut oil etc.

Prices and politics

• Prices of edible oil have been rising across the country since few months.
• Most edible oils are trading between Rs 130-Rs 190/litre.
• Also, the festive season will see increased buying of edible oils.

Impact of the move

• Consumers might not see a drastic reduction immediately in prices of edible oil.
• The reduction in duty is expected to affect the earnings of oilseed growers across the country.

Long-term implications

• Over the last few years, the government has taken a series of steps to remove India’s import dependency on pulses, and tried to do the same for oilseeds through national missions.
• However, frequent market interventions that ultimately bring down prices would backfire on the government and veer farmers away from growing oilseeds.
• We need continuity in prices to help farmers stick to oilseeds or pulses.

Back2Basic: Customs Duty

• Customs duty refers to the tax imposed on goods when they are transported across international borders.
• In simple terms, it is the tax that is levied on import and export of goods.
• Custom duty in India is defined under the Customs Act, 1962, and all matters related to it fall under the Central Board of Excise & Customs (CBEC).
• The government uses this duty to raise its revenues, safeguard domestic industries, and regulate movement of goods.
• The rate of Customs duty varies depending on where the goods were made and what they were made of.

Types of custom duty

1. Basic Customs Duty (BCD): It is the duty imposed on the value of the goods at a specific rate at a specified rate of ad-valorem basis.
2. Countervailing Duty (CVD): It is imposed by the Central Government when a country is paying the subsidy to the exporters who are exporting goods to India.
3. Additional Customs Duty or Special CVD: It is imposed to bring imports on an equal track with the goods produced or manufactured in India.
4. Protective Duty: To protect interests of Indian industry
5. Safeguard Duty: It is imposed to safeguard the interest of our local domestic industries. It is calculated on the basis of loss suffered by our local industries.
6. Anti-dumping Duty: Manufacturers from abroad may export goods at very low prices compared to prices in the domestic market. In order to avoid such dumping, ADD is levied.

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