With global edible oils prices declining sharply in the last one month due to improved supplies, a second round of price cuts has started in the Indian retail market. Several companies are expected to announce a cut in retail prices of edible oil soon, according to trade sources. These firms had reduced prices by about 5% in mid-June following the lifting of palm oil exports by Indonesia.
To curb rising inflation, the government on May 24 allowed tariff-free imports of crude soyabean and sunflower oils during this financial year and the next. According to trade data, landed prices of palm oil, which has a share of more than 56% in India’s import basket, fell by more than 36% to $1,010 a tonne, from the level a month ago.
Similarly, soyabean and sunflower oil prices have declined by 21% and 20%, respectively, to $1,350/tonne and $1,600/tonne, respectively, in the last one month. These two have a combined share of 43% in India’s edible oil import bill.
Earlier this month, the department of food and public distribution in a meeting with edible oil makers and trade associations had asked companies to reduce prices by at least Rs 15 a litre in view of a softening of global prices.
Adani Wilmar, India’s largest edible oil producer, last month cut prices by Rs 10/litre (nearly 5%) for soyabean, sunflower and mustard oils. Similarly, Mother Dairy, one of the leading milk suppliers in Delhi-NCR, last month reduced prices of the cooking oils by up to Rs 15 per litre, citing softening rates in global markets.
According to data from the department of consumer affairs, modal retail prices of edible oils — mustard, soya, sunflower and palm oil — have declined in the range of 5-11% in the domestic market since June 1.
“Indian consumers can expect to pay less for their edible oil and falling prices will help in cooling the inflation as well,” according to a food ministry statement on Monday.
India meets 56% of its annual edible oil consumption via imports and annual imports are around 13-14 million tonne (MT). Around 8 MT of palm oil is imported from Indonesia and Malaysia, while other oils, such as soya and sunflower, come from Argentina, Brazil, Ukraine and Russia.
The cooling of global prices which rose sharply in May 2022 when Indonesia, the world’s biggest exporter of palm oil, had imposed a ban on shipment. The supply of sunflower oil from Ukraine was disrupted because of its conflict with Russia.
Trade sources said the decision by Indonesia to lift the ban on exports last month has improved global supplies. Besides, exports of crude sunflower from Ukraine have commenced using the Poland land route. To curb rising inflation, the government on May 24 allowed tariff-free imports of crude soyabean and sunflower oils during this financial year and the next.
The tax waiver is subject to an annual cap of 2 MT for each oil, which will more than suffice to meet the needs of domestic refiners and ease supplies in the domestic market. The government also removed a residual 5% agriculture infrastructure development cess on the two crude edible oils.
Crude palm oil imports currently attract only a 5% agri infra cess and a 10% education cess on it, meaning a total tax incidence of 5.5%. Basic customs duty waiver will apply till September 30.