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The Indian government is considering lowering import taxes on vegetable oils in a fresh attempt to rein in food inflation, after prices of these essential commodities climbed by nearly 20% over the past year, according to two government officials and two industry sources who spoke on Wednesday.
India, the world's largest importer of vegetable oils, currently meets nearly two-thirds of its domestic demand through overseas purchases, primarily palm oil, soyoil, and sunflower oil sourced from Malaysia, Indonesia, Argentina, Russia, and Ukraine.
Any measure aimed at reducing prices is likely to stimulate consumption, as Indian households prepare to celebrate a series of festivals from September to November with sweets, snacks, and fried delicacies. On the global stage, stronger Indian demand would lend support to benchmark Malaysian palm oil and US soyoil futures, according to analysts.
One of the government sources attributed the price rally to supply disruptions linked to Russia's war on Ukraine, as well as to extreme weather patterns associated with El Nino and global warming. The same source noted that the government is seeking to protect consumers while safeguarding the interests of domestic farmers.
A government spokesperson did not immediately respond to a request for comment from Reuters.
India's annual retail inflation rate accelerated further in August, driven primarily by elevated food prices.
Rather than implementing a steep cut in import duties, the government may opt to reduce the basic import duty by 5%. This calibrated approach would help maintain domestic soybean prices above government-mandated support levels, thereby shielding oilseed farmers, a senior industry official explained. However, the same official cautioned that reducing import duties could trigger price increases in exporting countries as Indian demand picks up, adding that the tool is not an effective mechanism for managing prices.
In May 2025, India had already halved the basic import tax on crude edible oils to 10%. That move effectively brought the total import duty on crude palm oil, crude soyoil, and crude sunflower oil down to 16.5%, given that these oils remain subject to the Agriculture Infrastructure and Development Cess as well as the Social Welfare Surcharge. Nonetheless, international palm oil and soyoil prices moved higher following that earlier duty reduction.
Source: thehindubusinessline.com