After the import duty on crude edible oil was slashed last month, companies have started to pass on the benefit of lower tariff to consumers, and retail prices are likely to fall by 5-7% in the next few weeks, industry sources said.
The maximum retail price (MRP) of ‘Dhara’ brand of soyabean oil has been reduced by Rs 10/litre, according to a spokesperson of Mother Dairy. The selling price of sunflower oil has been reduced by Rs 5/litre, though its MRP remains unchanged as it was not revised upward during earlier price increase, the spokesperson said.
Executives at cooking oil companies say that prices may fall by 5-7% in the coming weeks, following the government’s decision on May 30 to slash import duty by 10%. “Edible oil prices had increased by about 15-20% following the import duty hike of 22% in September last year. With the cut announced now, prices should fall by about 5-7%,” the chief executive of a top firm said, declining to be identified.
Meanwhile, in a meeting organised by the food ministry on Wednesday, the edible oil industry has stated that passing the benefits of reduction in import duty to consumers is under process and it would reflect in the lowering of retail prices of cooking well soon. “Industry stakeholders are expected to adjust the price to distributors and the MRP in accordance with the lower landed costs with immediate effect. The associations have been requested to advise their members to implement immediate price reductions and share the updated brand-wise MRP sheets with the department on a weekly basis,” according to a food ministry statement.
Sudhakar Rao Desai, director and CEO of Emami Agrotech, said, “Edible oil prices should ease and we expect prices to fall by mid single-digits.”
Cooking oil manufacturers have been slow in passing on the price cuts so far, in part because most of them are sitting on higher-priced inventory. This may take about a month to get exhausted, industry sources said.
India’s palm, soyabean and sunflower oil imports account for around 57% of its edible oil consumption of around 25 million tonne (MT).
Following the import duty cut, the effective levy, including basic custom duty and cess on these three oils, came down to 16.5% from 27.5%. Sources said the reduction in duty was because of a sharp rise in prices of edible oils in recent months, while retail inflation in ‘oils and fats’ category was the highest in the food basket at 17.42% year-on-year in May.
However, the basic custom duty on refined oils remains unchanged at 32.5%.
India imports crude palm oils from Malaysia and Indonesia, while soyabean and sunflower oils are imported by Argentina, Brazil, Russia and Ukraine.