Centre cuts import duty on lentils, palm oil cess to tame food inflation

In an effort to tame food inflation, the government has reduced import duty on lentils to nil for Australia and Canada origins and cut it to 22%, from 30%, for those originating in the US.

It has also reduced cess on crude palm oil to 5% from 7.5%. However, the sudden decision to curtain the import window for moong by close to two months has surprised the industry, which has already entered into import contracts.

Prices of cooking oils are also on the rise after declining slightly in November. Mustard oil prices have increased to their earlier peak level of ₹175/kg wholesale. The decision to cut duty on imported palm oil from February 13 is expected to increase domestic refining by 60% as the duty difference between crude palm oil and refined palm oil has been increased to 8.25% from 5.5%.


Sandeep Bajoria, CEO, Sunvin Group, a consulting firm said, "Domestic edible oil prices had declined by about 10% to 12% by November from their peak. However, due to various geo-political reasons, change in palm oil export policy of Indonesia and concerns about the soyabean crop of South America, prices have again started moving upwards."

Industry expects that the current ratio of 50: 50 of crude and refined palm oil imports respectively will now change in favour of crude palm oil. "The increase in duty difference between crude and refined palm oil will incentivise local refining. We expect the imports to be now in 80 : 20 ratio of crude and refined palm oil respectively," said Bajoria.

India's decision to ease import of lentils has been appreciated in Australia, which has highest share in India's lentil imports. The Australian farmers are happy to get better returns and liquidate their stocks.

The domestic prices of lentils have been ruling at ₹70-73/kg as against the minimum support price of ₹64/kg. However, as the harvest of a good rabi crop of lentils has started this month, traders are surprised about the timing of duty reduction.