With its hands full fighting surging inflation, the Finance Ministry may not agree to the Food Ministry's suggestion for hike in import duty on edible oil in small packs, especially RBD palmolein. The Finance Ministry is expected to take a call on this issue within the next 7-10 days.
“We know that base is low and increase in import duty will have little impact on the landed price of palm oil. However, the problem is such that it will signal an upward trend in overall edible oils market,” a senior finance ministry official told BusinessLine . In such circumstances, the Customs duty may not be hiked.
After a petition from the Solvent Extractors' Association of Indian (SEA), the Food Ministry requested the Finance and the Commerce Ministry to check cheaper import of edible oil, especially in small packs from countries such as Indonesia.
The issue will be placed before the Empowered Group of Ministers soon and after that it will go to the Finance Ministry for a final action.
Indonesia, recently, reduced export duty on refined edible oils, mainly palm oil, in smaller consumer packet to two per cent. The import duty on refined palm oil in India is 7.73 per cent., But if the tariff value is taken into consideration, the effective import duty will be approximately three per cent.
“With just 5 per cent of duty, Indian market will be flooded with smaller packs. This will severely hurt the Indian industry,” the Executive Director of Solvent Extractors Association of India, Dr B.V. Mehta, said.
He denied that a decision to hike Customs duty will lead to a price hike. Dr Mehta said that the market is already in recession and it is likely to continue another three months. Secondly, a bumper crop is expected. “So, where is the question of price increase?” he wondered.
The Finance Ministry is also looking for the option of differential duty structure. It means different rates for smaller and bulk packaging. However, there are practical difficulties as the Custom Department has never applied differential duty, the official said.
The edible oil has a weightage of 3.04 in the wholesale price index (WPI) with palm oil just 0.41 per cent. But the Finance Ministry feels that there should not be any move which is expected to bring even a small change.
Last week, the Food Ministry approached the Finance and Commerce Ministries to take steps to curb import of cheaper small packs of edible oil from Indonesia. One of the steps suggested was higher import duty.
The Minister of State (Independent Charge) for Food, Consumer Affairs and PDS, Prof K.V Thomas, said that Indonesia's move to cut export duty on edible oils in smaller packs made imports in such form much cheaper here.
“Domestic oil mills are concerned and have appealed to the Ministry. It is then that we approached the Finance and the Commerce Ministries,” Mr Thomas said.
The Food Ministry has requested the Commerce Ministry to ensure that India does not become dumping ground for cheaper and smaller packs, Mr Thomas said. The Agriculture Ministry is also pushing hard for increasing oilseed production and plans to give more incentives to farmers. The Prime Minister Office (PMO) has also directed the Agricultural Department to come with an action plan within a month for increasing the production of oilseeds through the cluster mechanism. It has asked the Indian Council for Agricultural Research to develop high-yielding variety of pulses and oilseeds within two years.