Friday, March 21, 2008

Indian government reduces import duty on edible oils

by Jo Black

Indian federal government has been keeping a close watch on the domestic and international prices of essential commodities, particularly food items such as wheat, rice, pulses, and edible oils so as to keep inflation under check. It has also taken appropriate fiscal measures from time to time to achieve this objective. Full exemption from customs duty available to wheat has been extended beyond the expiry date of 31st December, 2007 and wheat flour has also been fully exempted from customs duty.

Over the last six months, the international price of rice has increased sharply from US $ 430 (August 2007) to US $ 590 (February 2008) (FAS US Gulf). Domestic retail price in Delhi markets increased from Rs.15 to Rs.18 per kg over the same period.

Owing to a surge in demand, international prices of edible oils have also continued to exhibit a sharp and steady upward trend in recent months. For instance, the international price of crude palm oil (fob Malaysia) has increased from US$ 770 PMT in the last week of August, 2007 to about US$ 1220 PMT in the last week of February, 2008. During the same period, the international price of sunflower oil (c.i.f. Rotterdam) has increased from US$ 947 to US$ 1695 PMT – an increase of about 79%.

An increase of this order has obviously put pressure on domestic prices of edible oils despite two rounds of reductions in customs duties on palm oil in April, 2007 (by 10 percentage points) and again in July, 2007(by 5 percentage points). Wholesale prices of RBD palmolein (Mumbai) have increased from Rs.4500 ($118.4) per quintal in August 2007 to Rs.5820 ($153.1) per quintal in February, 2008. Over the same period, price of sunflower oil (Mumbai) has increased from Rs. 4900 ($128.9) per quintal to Rs. 8250 ($217.1) per quintal and of mustard oil (Delhi) from Rs. 4960 ($130.5) per quintal to Rs. 6330 ($166.5) per quintal.

 

 

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