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India Cuts Tax on Crude Palm Oil Imports to Help Consumers, Refiners

A reduction in the tax will widen the gap between crude palm oil and refined palm oil import duties, effectively making it cheaper for refiners to import crude palm oil

Palm oil
The market capitalisation of energy and commodity firms in Thailand, Malaysia and India rose in recent months. Photo: Reuters.


India has cut its tax on crude palm oil (CPO) imports to 5% from 7.5%, the government said in a notice, as the world’s biggest edible oil importer tries to rein in local prices of the commodity and help domestic refiners and consumers.

The reduction in the tax, known as the Agriculture Infrastructure and Development Cess (AIDC), will widen the gap between the CPO and refined palm oil import duties, effectively making it cheaper for Indian refiners to import CPO, industry officials said.

The tax cut came into effect on Sunday.

“After the reduction in AIDC, the import tax difference between CPO and refined palm oil would widen to 8.25%,” said BV Mehta, executive director of Mumbai-based Solvent Extractors’ Association of India (SEA).

“This will help Indian refiners, but government needs to increase the difference further to 11% to encourage local refining.”

In an earlier notice, the government said it would also extend a reduction in a separate, basic customs duty on edible oils until September 30. The tax reduction had been due to expire on March 31.

India imports more than two-thirds of its edible oil needs and has been struggling to contain a rally in local oil prices over the last few months.

The country imports palm oil mainly from top producers Indonesia and Malaysia, while other oils, such as soy and sunflower, come from Argentina, Brazil, Ukraine and Russia.

Refined palm oil imports accounted for nearly half of India’s total palm oil imports in the past few months, Sandeep Bajoria, the chief executive of Sunvin Group, a vegetable oil brokerage and consultancy firm, said.

“The share of refined palm oil could come down to 20% with revision in the tax structure,” Bajoria said.

Indian refiners have been asking New Delhi to change the import duty structure as the overseas buying of refined palm oil was cheaper than CPO due to higher taxes imposed by producing countries on exports of CPO.

Mindful of an electorate that is highly sensitive to food price inflation, India’s government in the past few months tried to rein in domestic prices by reducing import taxes, imposing stockpile limits and suspending futures trading in edible oils and oilseeds.


  • Reuters with additional editing by Jim Pollard





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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.


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