The recent increase in duties on the import of crude and refined edible oils has resulted in an increase of about ₹2,500 on every tonne of an FFB (Fresh Fruit Bunch) of oil palm, bringing cheers to thousands of farmers in the country. The price, which used to be about ₹14,390 before the increase in import duty, rose to over ₹17,000, a rise of ₹2,610.

Though the sudden increase in prices brought cheers to farmers, they are also very cautious about the development. “It certainly helps us. But if they reduce the duties again, the prices will crash. Though we are happy at the moment, we are concerned about the sustainability,” Pullaiah, an oil palm farmer from Badradri Kothagudem district, told businessline.

The Union Government increased the basic customs duty on crude soybean oil, crude palm oil, and crude sunflower oil to 20 per cent from nil (zero per cent), making the effective duty on crude oils 27.5 per cent. The basic customs duty on refined palm oil, refined sunflower oil, and refined soybean oil has also been increased to 32.5 per cent from 12.5 per cent, putting the effective duty on refined oils at 35.75 per cent. The government said that the decision was taken to improve domestic oilseed prices and increase domestic production, and ensure that farmers receive fair compensation for their produce.

Farmers argue that the stabilisation of prices is very important. “What we want is an assured price of ₹20,000. The cost of production has gone up significantly. On the other hand, the yields have come down by 40-50 per cent in several areas,” he said. Farmers say the yields fell to 5-6 tonnes from about 10 tonnes an acre till recently. “At this level, we will be out of losses if we get ₹20,000 a tonne of FFB,” he said.

Telangana produces about 2.80 lakh tonnes of FFB from about 18,000 hectares. The state, which targets to grow oil palm in 20 lakh acres, presently covers an area of 90,000 hectares under the edible oil crop. The fresh crop, however, will take about 5 years to give yields. The Agricultural Department of Telangana estimated that the farmers in the state would get an additional earning of ₹12 crore this month, owing to the increase in the purchase price of FFBs.

“About 10,000 oil palm farmers are going to get this additional income. We hope that this will encourage more farmers to take up oil palm cultivation,” Tummala Nageswara Rao, Minister for Agriculture, said.

Commenting on the increase in the import duties on key edible oils, rating agency India Ratings and Research (Ind-Ra) felt that the hike is unlikely to have a material impact on the country’s oil imports, owing to the country’s high import dependency (57 per cent-60 per cent) to meet its domestic demand. The hike in the customs duty would increase the cost of importing edible oil by around 20 per cent, which is likely to be passed-on by sector companies, leading to an increase in the selling prices. 

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