Government Slashes Custom Duty on Edible Oils to Combat Rising Prices
In a significant move to address the escalating costs of cooking oils, the Indian government has announced a substantial reduction in Basic Custom Duty (BCD) on crude edible oils. This strategic decision, announced on June 11, 2025, aims to provide immediate relief to consumers while strengthening the domestic refining sector.
Major Duty Reduction Announced
The government has reduced the Basic Custom Duty on crude edible oils from 20% to 10%, covering essential oils including crude sunflower oil, soybean oil, and palm oil. This decision creates a duty differential of 19.25% between crude and refined edible oils, compared to the previous 8.75% differential.
The timing of this announcement is crucial, as it comes in response to the sharp price increases that followed the September 2024 duty hike, which was further aggravated by rising international market prices.
Impact on Consumers and Market Dynamics
This policy intervention is expected to have multiple positive effects on the market:
- Lower retail prices: Reduced import duties will decrease the landed cost of edible oils, directly benefiting consumers
- Inflation control: The move aims to cool overall food inflation by addressing one of its key contributors
- Enhanced domestic refining: The wider duty differential encourages local refining capacity utilization
- Reduced refined oil imports: The structure discourages imports of refined palmolein while promoting crude oil imports
Industry Compliance and Price Pass-Through
To ensure the benefits reach consumers promptly, the Department of Food and Public Distribution has taken decisive action. A high-level meeting was convened under the Secretary's chairmanship with leading edible oil industry associations and stakeholders.
The government has issued a clear advisory to industry players, requiring them to:
- Adjust Price to Distributors (PTD) immediately
- Revise Maximum Retail Price (MRP) in accordance with lower landed costs
- Submit updated brand-wise MRP sheets to the Department weekly
- Implement immediate price reductions across the supply chain
Strategic Benefits for Domestic Industry
The revised duty structure serves multiple strategic objectives. By creating a substantial 19.25% duty differential, the government is effectively channeling demand toward crude oils, particularly crude palm oil. This approach strengthens the domestic refining sector while ensuring fair compensation for farmers.
The policy creates a level playing field for domestic refiners, who have been struggling with competition from cheaper refined oil imports. This intervention is expected to revitalize the domestic refining industry and create more employment opportunities within the sector.
Economic Context and Rationale
The decision follows a comprehensive review of edible oil price trends since the previous duty adjustment. The September 2024 duty hike, combined with volatile international prices, had created significant inflationary pressure on Indian consumers.
Import duties represent one of the most significant factors affecting the landed cost of edible oils and, consequently, domestic retail prices. By addressing this key cost component, the government aims to provide immediate and substantial relief to millions of households across the country.
Market Outlook and Consumer Benefits
Industry experts anticipate that this duty reduction will create a ripple effect throughout the supply chain. The immediate implementation requirement ensures that consumers will experience price relief within weeks rather than months.
The policy also demonstrates the government's commitment to balancing multiple objectives: providing consumer relief, supporting domestic industry, and maintaining economic stability. The weekly monitoring mechanism ensures accountability and transparency in the implementation process.
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