Wednesday, 07 December 2022

Government cut duties on Edible oil

Government cut duties on Edible oil

On Saturday, the Union government slashed duties on edible oils to a decade’s low to ease prices at home, which have spiraled on the back of high global rates. The country meets two-thirds of its domestic demand for vegetable oils through imports.

The government has “further reduced the standard price of duty on crude palm oil, crude soyabean oil and crude sunflower oil by up to 2.5%”, a statement said. The standard-duty rate on refined oils of palm, soybean, and sunflower stands had been cutting by 32.5% in a series of moves to make vegetable oils cheaper.

In June, the government cut duties on palm oil by 5% and lifted restrictions in importing refined palm oil, as food inflation worries mounted.

Edible oil prices have increased up to 60%, according to data from the consumer affairs ministry from a year ago. The average cost per liter of mustard oil increased to ₹170 in August compared to ₹120 a year ago.

A government statement said.

“It may be noted that the International prices and thereby domestic prices of edible oils have been ruling high during 2021-22 which is a cause of serious concern from inflation as well as consumer’s point of view,”

Government cut duties on Edible oil 1pixabay image

Read More : Cabinet Approved 11,040 cr to cut palm imports

According to an August report of the Food and Agricultural Organisation, global prices have rallied sharply in recent months due to bad crops is vital producing nations and higher demand as economies reopened from Covid-19 shutdowns.

Higher food inflation not only impacts poorer households more, which tend to spend a larger share of their monthly budgets on food, compared to the well-off, but they also throw the Reserve Bank’s inflation targets off gear.

Palm is one of the most widely consumed oils found in everything from bread to ice-creams. Cutting import duties can decrease prices instantly. Edible oil is India’s third most high-value item import, after gold and crude oil. India usually imports from producers such as Malaysia, Indonesia, Brazil, Argentina, and Russia.

Throughout June, the government evaluated the price trends before taking a “decision” on cutting import duties, an official with knowledge of a matter said. The official said that the first cuts in tariffs came in June as the global commodity outlook showed the high prices were likely to hold.

Says Abhishek Agrawal, an analyst with Comtrade, a private commodity brokerage firm, adding retail prices should come down by at least ₹5.

“Prices are likely to slide only when summer harvests kick in by December. The duty cuts should bring down prices without much lag unless there is hoarding,”

Currently, India’s levies on edible oil imports range between 32.5% (the cheapest edible oil for palm oil) and 35% for soyabean oil. The country produces about 11 million tonnes of edible oil, but consumption hovers around 24 million tonnes.

According to official data, the total share of urban and rural consumption is 2.7% and 3.8%. Most demand comes from commercial users, like biscuits and snack makers.

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