‘Hike in oil import duty may trigger inflation, spoil festivity’

Oil seeds growers are in favour of increased import duty “but any such move may raise the risk of retail inflation”, says a study

Jasleen Kaur | The Dollar Business

Maintaining a balance between the interest of consumers and oil seeds growers has become a major challenge for the government as any hike in import duty on edible oils may lead to inflation amid increased buying due to festive season. Oil seeds growers are in favour of increased import duty to promote domestic production “but any such move may raise the risk of retail inflation”, the ASSOCHAM said in a study. Oil seed production in India declined from 32.7 million in 2013-14 to 26 million tonnes in the last financial year when the country spent $10 billion on the import of vegetable oil. And this year, the study said, the import bill is going to increase to $14 billion. Recently, the government had raised the customs duty on crude and refined edible oil to 12.5% and 20% respectively. The move was aimed at protecting the domestic oil manufacturers as prices of edible oil in the international market fell sharply due to weak demand and surplus supply. “While there is a demand for more such protection for the farmers, the move may lead to spiral in consumer inflation, which the government can ill-afford, learning from the pulses experience,” the ASSOCHAM study said. Policy makers are facing a major challenge in promoting oil seeds cultivation as farmers no longer find it profitable due to steep fall in the price. “That, in a way, is also coming in the way of the Prime Minister Narendra Modi’s ambition of making India self-sufficient in the area of edible oils. After all, $14 billion import bill on account of cooking oil is a huge drain on the country’s foreign exchange,” ASSOCHAM Secretary General D S Rawat said. Though India imports edible oils to meet its domestic requirement, made-in-India products also find buyers in the international market because of lower price tag, said Himani of Chemical and Fragrance Corporation. “Most of the time India import corn oil from Canada and US because of its good quality,” he told The Dollar Business. Talking about the challenges faced by the domestic edible oil industry, the ASSOCHAM paper also suggested measures such as modernization of oil seed production, processing, and strategic marketing of vegetable oils, oil seeds, and by-products.  

November 06, 2015 | 5:48pm IST.   

The Dollar Business Bureau - Nov 06, 2015 12:00 IST