Here’s how Narendra Modi govt is looking to cut your festive season food bill

In a bid to boost supplies and check prices of agricultural commodities during the upcoming festive season, the government on Friday cut import duty on wheat and potato to 10% while reducing it by 5% on crude as well as refined palm oils.

The move would help in importing the commodities once their prices start going up.

The Central Board of Excise and Customs (CBEC) in a notification stated that the import duty on wheat has been reduced from 25% to 10% till February 2017. It also said that the import duty on potatoes has been reduced to 10% from 30% till October 2016.

According to the notification, duty on crude palm oil has been reduced to 7.5% from 12.5% and on refined palm oil to 15% from 20%.

It’s noteworthy that in case of wheat, the government has reduced the import duty despite reported higher domestic production of 93.50 million tonne (MT) in the 2015-16 crop year (July-June).

Earlier, the food ministry had proposed the cut in wheat import duty as the procurement by the government-owned agencies like FCI had dropped sharply to close to 23 MT this year, from 28 MT reported last year.

Industry sources said that the flour millers had demanded withdrawal of the import duty citing 5 MT shortfall in the domestic output. FE earlier this week had reported that the government would soon take a call on restricting sale of wheat stock by FCI through open market sale scheme (OMSS) to bulk buyers mainly because of inadequate stock level.

In FY16, FCI had sold 7.1 MT of wheat through OMSS while in the 2014-15, the corporation had sold more than 4.2 MT of grain to bulk purchasers. The food ministry in consultation with FCI is set to decide on continuing with OMSS for wheat to bulk buyers such as flour millers and food companies shortly.

Sources told FE that even prior to commencement of coming festive season when demand for wheat usually picks up, FCI has sold close to 2.2 MT of wheat under OMSS in the current fiscal so far.

In case of potato, the government reduced the import duty to improve the domestic availability. As per the official data, potato output has declined by 9% to 43.7 MT in 2015-16 crop year (July-June) compared to 48 MT last year.

Edible oil industry body Solvent Extractors Association of India has opposed the import duty cut on refined palm oil. It stated that higher duty difference between crude and refined palm oil would encourage domestic refining.

Currently the country’s half edible oil requirement is met through palm oil import from Malaysia and Indonesia. The country is set to import record 15 MT in the current 2015-16 oil year ending October.