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In a decisive move to alleviate rising food prices and invigorate domestic refining, the Indian government has reduced the basic customs duty on crude edible oils including sunflower, palm, and soybean oils from 20% to 10%. This policy adjustment, effective May 31, 2025, lowers the effective import tax rate to 16.5% when accounting for the 5% Agriculture Infrastructure and Development Cess (AIDC) and the Social Welfare Surcharge.
Strategic Shift to Support Consumers and Industry
The reduction aims to make essential cooking oils more affordable for consumers and to bolster the domestic refining sector. Industry bodies such as the Solvent Extractors’ Association (SEA) and the Indian Vegetable Oil Producers’ Association (IVPA) have lauded the decision, viewing it as a timely intervention to support refiners and discourage imports of finished products.
“This step strengthens domestic refining, protects jobs, and supports value addition across the edible-oil value chain,” stated Sudhakar Desai, President of the IVPA.
Inflationary Pressures Prompt Policy Response
India relies heavily on imports to meet over 70% of its vegetable oil demand. The government’s decision comes amid efforts to control inflation, particularly food prices. By lowering the import duty on crude oils, the government aims to reduce the landed cost and retail prices of edible oils, providing relief to consumers and helping to cool overall inflation.
Encouraging Domestic Refining and Farmer Welfare
The increased duty differential between crude and refined oils from 8.25% to 19.25% is designed to encourage domestic refining. This move is expected to protect the sector from an influx of refined oils, which can cause capacity injury to the vegetable oil industry.
Moreover, the policy is anticipated to ensure fair prices for oilseed farmers by balancing imported and domestically produced oils.
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