Custom Duty Hike On Crude And Refined Oils Set To Greatly Benefit Farmers

The Indian government’s recent decision to hike customs duties on crude palm and refined sunflower oil is expected to significantly boost farmers’ incomes, particularly in states like Maharashtra and Madhya Pradesh. These regions, known for their substantial production of oilseeds such as soybean and sunflower, stand to benefit greatly from the new tariff structure, a senior government official revealed on Saturday.

According to the latest notification from the Ministry of Finance, the basic customs duty on crude palm, soybean, and sunflower seed oil has been raised from 0% to 20%. Meanwhile, the duty on refined versions of these oils has seen a significant increase from 12.5% to 32.5%. Consequently, the overall effective duty on these oils will jump from 5.5% to 27.5% for crude oils and from 13.75% to 35.75% for refined oils.

These tariff revisions come at a time when the global market for edible oils has been in a state of flux. Despite the challenges, the government has successfully managed domestic prices, which have been on a steady decline for nearly two years. “This is a smart move by the government to support soya and oilseed farmers without triggering negative market reactions,” said the official. The new duty structure is expected to cushion local farmers from the volatility of international oil prices and provide them with more competitive pricing for their crops.

The official added that these measures were possible because of the effective management of the government to contain domestic prices of edible oil, which have been falling continuously for nearly two years now.

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“These are very smart moves by the government to support soya farmers without affecting market sentiments,” the official said.

Besides Madhya Pradesh and Maharashtra, the other major oil seed producing states are Gujarat, Rajasthan, Karnataka, Andhra Pradesh, Uttar Pradesh, Telangana and Tamil Nadu.

The government had previously fixed USD 550 per tonne as the minimum export price (MEP), which essentially meant that farmers could not sell their produce overseas lower than this rate.

A Directorate General of Foreign Trade (DGFT) notification issued on Friday removed the MEP with immediate effect.

The government has also slashed the duty on onion export to 20 per cent from 40 per cent. There is no export duty on ‘Bangalore rose onion.’

Last week, Consumer Affairs Secretary Nidhi Khare noted that the outlook for onion availability and prices in coming months remains positive as the kharif (summer) sown area has increased sharply to 2.9 lakh hectare till August from 1.94 lakh hectare in the year-ago period.

About 38 lakh tonne of onion are reported to be still in storage with farmers and traders, she had said.

Commerce and Industry Minister Piyush Goyal has said that with the removal of the MEP and reduction in export duty from 40 per cent to 20 per cent, onions can be exported in larger quantities.

“This decision, which will increase the income of farmers and exporters, will greatly encourage business in the agricultural sector,” he said on social media platform X.

On removal of MEP on basmati rice, the minister said that it would help increase exports and farmers’ income.

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