Oil seed production globally caused panic in Indian edible oil industry

NEW DELHI: Bumper oil seed production globally caused panic in Indian edible oil industry, which asked the government to hike import duty on the commodity by a large amount in order to prevent dumping leading to losses of Rs 607.89 ($10) billion for the Indian sector, putting its health at stake. According to industry sources, a request was made to the Food Ministry last week, whereby sector players asked for an increase in the import duty of crude edible oil to 10% (from the current 2.5%) and 25% for the refined product (from the present 10%).

The local industry also approached other government departments with this request. The domestic industry argued if this is not done, there’s a possibility that imports of edible oil increase by 12% yearon-year to over 13 million tonnes next year, affecting farmers and refiners alike due to dumping into the Indian market. “We estimate it could be a total loss of Rs 607.89 ($10) billion in terms of trade, procurement, logistics, crush, exports, value chain and a huge loss in employment due to under utilization of domestic manpower, plants. The quantum of FX reserve loss would be same as percentage increase in import requirements,” Dinesh Shahra, Founder and MD of Ruchi Soya, told ET. Shahra explained the crushing industry would suffer due to (price) disparity, refining would suffer due to dumping and falling margins would eventually result in extremely low prices for Indian farm produce. This implies if crushing of domestic produce falls, it will lead to lower oil availability in turn calling for more imports and loss in forex reserves. “All of this will result in a major loss of acreage in oilseeds next season, which is very negative for Indian economy in long run,” he added.

Similarly, Atul Chaturvedi, CEO of Adani Wilmar, maker of Fortune refined oil, said this is the most opportune moment for the government to increase import duty on edible oil as internationally prices may still fall further, increasing the risk of dumping into India.

“We asked for a difference of 15% in import duties of crude and refined edible oil so that the refining industry in India, which is idling, can be encouraged,” Chaturvedi told ET.

Indian dependence on imported edible oil is 60% and the country is expected to import 11.3 million tonnes this year. Government officials looking into the matter said while they are considering the industry’s request seriously, they’re also evaluating the impact on consumers as edible oil price may become costly if import duties increase.