The Indian Ministry of Finance has cut the import duty on crude palm oil by 10% to 27.5%, the government said in a statement, as New Delhi tries to bring down rising food prices.
India is the world’s biggest importer of palm oil. It imports around 9 million tonnes of palm oil annually, mainly from Indonesia and Malaysia. The duty cut will be effective from November 27.
Market sources estimate that palm oil imports to India in December could increase to around 700,000-730,000 mt, up from earlier estimates of 550,000-600,000 mt. Market participants have welcomed the move.
Mumbai-based Sunvin Group’s founder and CEO, Sandeep Bajoria, said, “The government was concerned with the high prices locally, and called for the duty reduction to cool the market. The import margins are currently negative at $25-$30/mt, and this move will see the disparity vanish.”
“I expect that Indian palm oil imports will increase by around 100,000 mt a month at the cost of soft oil imports, which could decrease by the same magnitude. Palm prices at origin could increase by around $20/mt, while soft oil prices at origin are likely to reduce by $15-20/mt,” he added.
The reduction in the duty was only on palm oil, but not on soybean oil and sunflower oil, which could cause an imbalance in the market. Palm imports are likely to increase significantly, but prices are likely to follow with elevated demand. “I think it could be a matter of time before the duty reduction is normalized, and the favourable effect on local prices could be negated,” the source said.
