Govt cuts palm oil duty to keep prices under check

NEW DELHI: As part of the government’s efforts to keep prices from spiralling out of control, the finance ministry on Friday announced reduced import duty on crude palm oil from 80% to 70%. “The step has been taken to cushion the impact of increase in international prices of edible oils.

Palm oil prices are firming up in the global markets and the landed costs of the commodity is also expected to go up. This has been done to keep the prices in the country under check ,” Gautam Ray, joint secretary in the department of revenue, said.

Speaking in Parliment a few days ago, finance minister P Chidambaram had said the government would take more steps to keep prices of essential commodities under check. Today’s move is seen as part of the package being designed by the Government in that direction.

Within the last couple of months, the government has slashed import duty on wheat to 5% and exempted sugar and pulses from customs duty. In the case of wheat, the State Trading Corporation has been allowed to import 3.4 m tonnes import at nil duty.

The government has also cut customs duty on refined bleached deodorised palm oil from 90% to 80%. The duty cuts will come into effect immediately. Mr Ray said the duty cut would cost the exchequer Rs 650 crore in the current fiscal year.

But it would not hurt the realisation of Budget estimates, as the government had earned an additional Rs 600 crore when the duty was set higher.

Even after today’s duty cut, the landed cost of palm oil will be higher compared to the February levels. The international prices of palm oils have been rising during the current financial year, which has resulted in increase in domestic prices of edible oils.

For instance, tariff value of crude palm oil, on the basis of which import duty is charged, has gone up from $417 per metric tonne in the first week of February 2006 to $447 PMT in August 2006. Tariff value is fixed on the last 15 days of Freight on Board average price.