Govt reduces AIDC on crude soya, sunflower & palm oils

With edible oil prices expected to rise during the festivals, the Centre on Wednesday effectively abolished the basic customs duty on crude palm, soybean, and sunflower oil and slashed the agricultural processing duty on them until March 2022, just days after allowing states to impose stock limits on oilseeds and edible oil.

Traders and market watchers, on the other hand, believe that the timing of the cut could harm farmers’ realisation when they harvest their kharif soybean and groundnut crop.

While the extent to which it will affect final consumer costs is unknown, overseas markets have already priced in the duty decrease and have pushed up prices to offset the impact. Because indigenous output is insufficient to fulfil demand, India imports 55-60% of its yearly edible oil consumption.

The Solvent Extractors Association (SEA), a leading trade group for domestic oilseed processors, believes that retail prices for key edible oils could drop by up to Rs 15 per litre in the coming weeks.

The most recent duty reduction was announced on September 11th, when crude oil basic duties were reduced by 2.5 percent and refined oil basic charges were reduced by 35.75 percent.

The duty reductions will take effect on October 14 and will last through March 31, 2022, according to the Central Board of Indirect Taxes and Customs (CBIC).

Crude palm oil will now be subject to a 7.5 percent agri infrastructure development cess (AIDC), while crude soybean oil and crude sunflower oil will be subject to a 5% AIDC.

The agriculture infrastructure cess on all types of crude and refined edible oils was 20% before today’s lowering.

The effective customs duty on crude palm, soybean, and sunflower oil kinds will be 8.25 percent, 5.5 percent, and 5.5 percent, respectively, after the reduction.

Furthermore, the basic customs charge on refined sunflower, soyabean, palmolein, and palm oil kinds has been reduced from 32.5 percent to 17.5 percent.

“The tax decrease has an impact of around Rs 14,000 per tonne on crude palm oil, while it has an impact of around Rs 20,000 per tonne on crude soybean oil and crude sunflower seed oil.”

He claimed that market speculations in recent days had already discounted the domestic price to some amount, but that refined oil prices may drop by Rs 6 to 8 per kg as a result of the duty reduction.

According to data from the department of consumer affairs, prices of packed groundnut oil and mustard oil in Delhi markets have risen by 2% and 5%, respectively, in the previous month, while soybean and palm oil prices have fallen by 5% and 1%.

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