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India's recent reduction in edible oil import duties will provide only partial relief to consumers and fast-moving consumer goods manufacturers during the upcoming festive season, with prices expected to remain elevated due to persistent global supply tightness, biofuel blending mandates, rising shipping costs and a weaker rupee, according to India Ratings and Research.
The Indian government had lowered basic customs duties on various edible oils by approximately 5 to 10 per cent in an effort to cool domestic prices ahead of the festive period. The decision was aimed at curbing food inflation, which has been amplified by ongoing geopolitical disruptions and an underwhelming monsoon season.
Domestic edible oil prices climbed roughly 20 per cent in the first half of FY27, driven by a combination of firmer international prices and currency depreciation, against the backdrop of India's heavy reliance on imports to meet domestic demand.
The duty reduction translates into a 4 to 5 per cent decrease in the landed cost of palm and soybean oils. The impact will be more pronounced for sunflower oil, where the effective duty has been slashed to 5.5 per cent from 16.5 per cent. However, India Ratings and Research noted that the full transmission of these savings to end consumers will depend on how international prices respond to the duty cut, given India's position as one of the world's largest edible oil importers.
Beyond direct consumer benefits, the price reduction offers some respite to FMCG producers, since palm oil and its derivatives constitute a major input across bakery products, biscuits, cakes, chocolates, cosmetics, soaps and detergents.
Despite the duty relief, prices are forecast to remain on the higher side owing to a tight global demand-supply balance. The global market is being shaped by biofuel blending mandates in major producing countries, the looming El-Nino threat to output, supply chain disruptions affecting trade flows, elevated shipping costs and continued weakness in the Indian rupee.
Global palm oil prices rose approximately 15 per cent to nearly USD 1,300 per metric tonne in the first half of FY27. Global production is expected to remain largely flat through the 2026-27 season, while consumption is projected to grow 2 to 3 per cent, supported by rising biodiesel demand in Indonesia and a contraction in exportable surplus.
India Ratings and Research concludes that the import duty cut is likely to drive a pickup in imports ahead of the festive season, which in turn could keep global palm oil prices elevated through 2026.
Source: Deccan Chronicle