Why edible oil is not getting cheaper despite duty free import, know what is the reason for inflation

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Why edible oil is not getting cheaper despite duty free import, know what is the reason for inflation


Photo:FILE Edible Oil

Sunflower and soybean degum oil prices saw an increase in the Delhi oil-oilseeds market on Saturday due to impact of competition and widening demand-supply gap despite duty-free imports of sunflower and soybean degum oil. The effect of this rise was also seen on mustard oil-oilseeds, soybean oil, crude palm oil (CPO) and palmolein oil prices and these oils also saw an upward trend.

Traders said groundnut oilseeds, soybean seed and loose (oilseeds) and cottonseed oil prices remained unchanged amid delay in arrival of new cottonseed crop in mandis due to rains and non-selling by farmers at lower prices. Traders said the Chicago exchange remained unchanged last night. Sources said that the government should immediately reconsider one of its decisions on duty-free import of sunflower and soybean degum oil (20-20 lakh tonnes of both oils per annum, for the next two years) and take a decision immediately, as it will reduce the cost of soybean and sunflower. Oil prices are on the rise.

Sources said that the government has given duty-free import exemption only to oil processing companies and they will be able to import duty-free 20-2 million tonnes of sunflower and soybean oil for the next two years. After this, the rest of the importers will have to pay import duty at the rate of Rs 7 per kg. Sources said that the prices of other imported oils will be expensive as compared to the lower price of the duty-free import, as the cost of import duty will also be added to it. In this situation, traders are refraining from taking new deals by paying import duty, as the market price will be governed by the discounted oil price. Such a situation is widening the demand-supply gap and the short supply situation in the market may push up the prices of other edible oils as well.

The government should immediately reconsider this decision and take some remedial steps. Sources said that the price of sunflower crude oil at Kandla port is Rs 112 per kg. Its refining cost will be maximum of Rs.6 per kg. That is, after refining at Kandla port, the wholesale price of sunflower oil should be Rs 118 per kg. On the other hand, a major Ahmedabad-based oil processing company has fixed the wholesale price at Rs 145 per kg. That is, when the wholesale price will be about Rs 27 more per kg, then the customers will get this oil in more expensive in retail. This situation is also indicative of shortage of supply.

Similarly, crude soybean degum oil price at Kandla port is Rs 105 per kg and after refining its wholesale price is Rs 109. On the other hand, it is being sold at the Kandla port at a wholesale price of Rs 115 a kg. Sunflower oil consumers are getting Rs 180-190 a liter (910 grams) and soybean refined oil at Rs 140-145 a liter in the retail market. That is, the decision to import duty free instead of giving the expected results has led to short supply in the domestic market, thereby widening the demand-supply gap. Sources said that when imports were free, the wholesale prices of these oils used to be low. But due to ‘short supply’ after duty free imports, the prices of these oils are being sold at a premium.

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