India mulls raising import taxes on vegetable oils

India is considering increasing import taxes on vegetable oils as a means to protect farmers who are struggling with declining oilseed prices, according to two sources on Wednesday.

The move, which is expected to be announced in the coming weeks, could have a significant impact on the global vegetable oil market, potentially reducing demand and overseas purchases of palm oil, soy oil, and sunflower oil.

A government source, speaking on condition of anonymity, confirmed that the proposal is under consideration and is being discussed by the farm ministry and the Department of Revenue.

While a final decision has not yet been made, the government is actively exploring options to support farmers affected by falling oilseed prices.

In 2022, India, the world’s largest importer of vegetable oils, abolished basic import taxes on crude vegetable oils in an effort to cool prices. However, a 5.5 per cent tax, known as the Agriculture Infrastructure and Development Cess, remains in place.

Farmers have expressed concern over the sharp decline in oilseed prices, arguing that higher import tariffs would help to stabilise domestic markets.

Soybean prices, for example, have fallen to around 4,200 rupees ($50) per 100 kg, well below the government-fixed support price of 4,892 rupees.

Farmers in Maharashtra, India’s second-largest soybean-growing state, have been particularly vocal about the impact of falling prices on their livelihoods. Many are struggling to cover their production costs and earn a profit at the current price levels.

The Bharatiya Janata Party (BJP), led by Prime Minister Narendra Modi, is expected to prioritise the concerns of farmers, who constitute a significant voting bloc, ahead of regional elections in Maharashtra later this year.

The new soybean crop, which is expected to arrive in six weeks, is likely to further depress prices, according to B.V. Mehta, executive director of the Solvent Extractors’ Association of India.

In July, India’s vegetable oil imports surged by 22.2 per cent to 1.9 million metric tons, making it the second-highest on record. The country relies heavily on imports to meet its domestic demand for vegetable oils, with over 70 per cent of consumption being imported.

India primarily sources palm oil from Indonesia, Malaysia, and Thailand, while soy oil and sunflower oil are imported from Argentina, Brazil, Russia, and Ukraine.

Attribution: Reuters