India looks set to increase vegetable oil import taxes to help support local farmers

A hike in import duties by the world’s leading edible oil importer – the second in six months – could lift local vegetable oil and oilseed prices, while potentially dampening demand and reducing overseas purchases of palm oil, soyabean oil, and sunflower oil, according to the 24 February report.

In September 2024, India imposed a 20% basic customs duty on crude and refined vegetable oils. Following the revision, import duties on crude palm oil, crude soyabean oil and crude sunflower oil increased from 5.5% to 27.5%, with a 35.75% import tax on refined grades of the three oils.

However, soyabean prices were still trading more than 10% below the state-set support price after the duty hike, the report said.

Due to lower oilseed prices, it made sense to raise import duties on edible oils, a government official who did not wish to be named was quoted as saying.

The exact amount of the increase has not yet been decided, according to the official.

Oilseed farmers were under pressure and needed support to maintain their interest in oilseed cultivation, BV Mehta, executive director of the Solvent Extractors’ Association of India (SEA), was quoted as saying.

Indian refiners had cancelled orders for 100,000 tonnes of crude palm oil scheduled for delivery between March and June, partly due to the likely hike in import duties, Reuters wrote on 20 February.

India meets almost two-thirds of its vegetable oil demand through imports, buying palm oil mainly from Indonesia, Malaysia and Thailand, while importing soyabean oil and sunflower oil from Argentina, Brazil, Russia and Ukraine.

Against this backdrop, India’s production of rapeseed and rapeseed oil in 2024/25 is expected to fall, according to a report by the US Department of Agriculture (USDA).

Rapeseed production was estimated at 11.7M tonnes – down from 12.3M tonnes the previous year, the USDA’s 13 February Foreign Agricultural Service (FAS) report said.

The drop in production was due to a shift to the planting of more profitable crops and a reduced planted area of 8.9M ha compared to the previous estimate of 9.3M ha, according to the FAS’s Oilseeds and Products Update: India.

In addition, production was impacted by the southwest monsoon which led to increased planting of more water-intensive crops like wheat, rice and chickpeas.

Despite an estimated 5% drop in production and planted area, rapeseed yields had been consistent at 1.3M tonnes/ha, due to good weather conditions that supported soil moisture, efficient fertilisers and high yielding varieties, the USDA said.

The USDA maintained its forecast for rapeseed crushing at 10.5M tonnes due to consistent demand.

Rapeseed oil output was revised to 4M tonnes, a 5% drop from the previous forecast of 4.2M tonnes, driven by lower oilseed production.

“However, favourable temperature and rainfall benefitted the rapeseed grain and podding stage which is likely to help in maintaining the oil content and extraction rates,” the USDA said.

Rapeseed oil consumption remained steady at 4M tonnes, compared to the initial forecast of 4.1M tonnes, due to its continued popularity as a traditional cooking oil in urban markets and rural areas, the report said.

“However, the preference for other oils like sunflower and refined oils has been on the rise in more urban areas due to their lighter taste and cooking properties,” the USDA said.

“In rural areas, rapeseed oil is still the preferred oil due to its strong flavour and versatility in traditional cooking. Almost all India’s rapeseed oil is consumed locally, and trade is negligible.”

The USDA revised its rapeseed oil ending stock lower from an initial estimate of 490,000 tonnes to 358,000 tonnes due to a low rapeseed production year and continued edible oil demand.

Tags: imports, demand, crude soyabean oil, sunflower oil, crude sunflower oil, prices, duties, Vegetable Oil, soyabean oil, Crude palm oil, Production, India, taxes, palm oil