Cut in Tax on crude palm oil imports

February 14, 2022

Central Government cut tax on imports of crude palm oil (CPO), from 7.5 percent to 5 per cent. It came into effect on February 13, 2022.

Key Facts

India is world’s biggest edible oil importer. It tries to rein in local prices of commodity and help domestic consumers and refiners.

Reduction in the tax

Reduction in the tax is also known as “agriculture infrastructure and development cess (AIDC)”.
It will widen the gap between refined palm oil import duties and CPO.
The tax reduction is effectively making it cheaper for Indian refiners to import CPO.
After the reduction in AIDC, import tax difference between CPO and refined palm oil would increase to 8.25 per cent.
This reduction will help Indian refiners, but government needs to further increase difference to 11 per cent in order to encourage local refining.

How will tax cut help?

Tax cut will make crude palm oil more attractive as compared to soy oil and sunflower oil for Indian refiners. It will thus boost imports of tropical. Tax cut will provide a necessary respite for consumers from high edible oil prices.

Import of edible oil

India imports more than two-thirds of its edible oil needs. It has been struggling to contain a rally in local oil prices in last few months. India imports palm oil mainly from top producers like Indonesia and Malaysia. It imports soy and sunflower oil from Brazil, Argentina, Russia and Ukraine.

Palm oil

Palm oil is the most widely imported and used oil in India. It is mainly imported for bulk buyers like food processors and for use in restaurants. Households in India prefer sunflower oil, soy oil, and rapeseed oil.

Agriculture Infrastructure and Development Cess (AIDC)

AIDC is a tax, imposed by government on the commercial production of agricultural produce. The charge rate depends on the production capacity. The money collected by government through AIDC is utilized for the infrastructure development in agriculture across India.

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