iStockA cooking oil manufacturers' association of India has said that the decision of the central government to allow duty free import of 20 lakh tonnes of sunflower oil and soybean oil each per year for the next two years to ease domestic cooking oil prices will be counterproductive. It will lead to shortages and price rise during the next few months, just ahead of the festival season, said the association in a letter written to the Union Commerce minister Piyush Goyal.
The central government had notified Tariff Rate Quota (TRQ) on May 24. Under TRQ, import of allocated quota takes place at specified duty or at zero duty.
Cooking oil has been leading food inflation in the country for more than a year due to various international factors.
The cooking oil manufacturers’ association, known as the Solvent Extractors’ Association (SEA) has said that the actual effect of TRQ in the domestic market will be felt 2-3 months after its implementation. However, in the intervening period, prices have the potential to rise as the festival season in India starts shortly and consumption also goes up after the rains set in, said SEA.
Another problem is that the TRQ will create a dual duty structure whereby the TRQ imports will have nil duty and non-TRQ imports a duty of 5.5%. India's annual import of soyabean oil is 3.5 - 4 million tonnes against which TRQ is 2 million tonnes. The time lag between a buying decision for sunflower and soyabean oil and its arrival in India is about three months. "As a result, once an importer has exhausted the TRQ, he will not import under normal duty till other importers are having TRQ stocks. This could result in a shortage in the country till imports under normal duty start arriving," said SEA.
"The industry is confused by this decision. TRQ will take away the ease of doing business," said BV Mehta, executive director,
In case the prices fall in the international market, a likely scenario, the industry thinks that India may have trouble in increasing duties, if the country binds itself to TRQ. It has suggested that instead of TRQ, the government may reduce the duty on sunflower and soyabean oil to zero for the time being till September.
The central government had notified Tariff Rate Quota (TRQ) on May 24. Under TRQ, import of allocated quota takes place at specified duty or at zero duty.
Cooking oil has been leading food inflation in the country for more than a year due to various international factors.
The cooking oil manufacturers’ association, known as the Solvent Extractors’ Association (SEA) has said that the actual effect of TRQ in the domestic market will be felt 2-3 months after its implementation. However, in the intervening period, prices have the potential to rise as the festival season in India starts shortly and consumption also goes up after the rains set in, said SEA.
Another problem is that the TRQ will create a dual duty structure whereby the TRQ imports will have nil duty and non-TRQ imports a duty of 5.5%. India's annual import of soyabean oil is 3.5 - 4 million tonnes against which TRQ is 2 million tonnes. The time lag between a buying decision for sunflower and soyabean oil and its arrival in India is about three months. "As a result, once an importer has exhausted the TRQ, he will not import under normal duty till other importers are having TRQ stocks. This could result in a shortage in the country till imports under normal duty start arriving," said SEA.
"The industry is confused by this decision. TRQ will take away the ease of doing business," said BV Mehta, executive director,
In case the prices fall in the international market, a likely scenario, the industry thinks that India may have trouble in increasing duties, if the country binds itself to TRQ. It has suggested that instead of TRQ, the government may reduce the duty on sunflower and soyabean oil to zero for the time being till September.
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