Will Edible Oil Prices Decrease as Refineries Transfer Customs Duty Benefits?
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Synopsis
The recent customs duty cut is set to lower edible oil prices in India. As refiners pass on cost savings to consumers, the trend of rising prices is expected to reverse. This article explores how these changes impact consumers and the edible oil market.
Key Takeaways
- Retail prices of edible oil are expected to decline.
- The customs duty cut will benefit consumers.
- Food inflation is easing, promoting lower prices.
- A strong monsoon is predicted to support agricultural yields.
- India continues to be a major importer of edible oils.
New Delhi, June 17 (NationPress) The retail prices of edible oil in India, which experienced a stable trend during the initial months of 2025 due to high global prices and currency depreciation, are predicted to decrease in the near future as refiners transfer the benefits of cost reductions to consumers.
This expectation follows the customs duty cut announced by the Government on May 30, as highlighted in a recent CareEdge report.
The Ministry of Consumer Affairs has mandated edible oil companies to lower their Maximum Retail Prices (MRPs) and provide weekly updates regarding Price-to-Distributor (PTD) rates.
With food inflation declining to 2.8 percent in May and the Indian Meteorological Department predicting a robust monsoon, these factors are expected to collectively push down retail prices of edible oil, according to the report.
The widening duty differential between crude and refined edible oils will also enhance the competitive edge for domestic refiners.
As the basic customs duty on crude palm oil has been lowered to 10 percent, while the duties on refined oils remain unchanged at 32.5 percent, the effective duty differential has increased to 19.25 percent from 8.25 percent.
This revised duty framework is poised to benefit key players by motivating refiners to prefer crude imports over refined oils, thereby improving capacity utilization and refining margins through increased domestic processing.
India continues to be the world's largest importer of edible oils, sourcing approximately 55-60 percent of its domestic needs via international purchases, primarily from Indonesia and Malaysia.
In the Oil Year 2023–24, India's imports of edible oils reached about 15.96 million tonnes (MT), with palm oil making up around 55 percent of this total, followed by soybean and sunflower oils.
During the first seven months of the oil year 2024–25 (from November 2024 to May 2025), edible oil imports were approximately 1.07 MT.
The Indian Vegetable Oil Producers’ Association (IVPA) reported a rise in refined palm oil imports from 0.458 MT during Q2FY25 (June-September 2024) to 0.824 MT (which constitutes 30 percent of total palm oil imports) from October 2024 to February 2025, largely due to a duty increase on crude palm oil in September 2024.
Additionally, costs for refined palm oil and freight are roughly $45-50 per tonne lower than those for crude palm oil, incentivizing imports of refined oils over crude palm oil.
Moreover, this trend is amplified by the export policies of supplying countries, which typically impose higher export duties on crude palm oil compared to refined palm oil.
According to data from the Solvent Extractors' Association (SEA) of India, palm oil imports surged by 84 percent month-on-month in May 2025 to hit 0.59 MT — the highest monthly volume since November 2024, as palm oil was trading at a discount compared to soybean oil and sunflower oil, prompting refiners to increase their purchases.
Point of View
It is crucial to recognize the positive shift in edible oil pricing as refiners adjust to government policies. This not only assists consumers in managing their expenses but also enhances the competitive landscape for domestic producers. Such proactive measures by the government reflect a commitment to economic stability and consumer welfare, which is essential in today's volatile market.
NationPress
17/06/2025
Frequently Asked Questions
Why are edible oil prices expected to decrease?
Edible oil prices are anticipated to decrease due to the customs duty cut announced by the government, which allows refiners to pass on cost benefits to consumers.
What impact will the customs duty reduction have on consumers?
The reduction in customs duty is expected to lower retail prices for consumers, making edible oils more affordable in the coming weeks.
How does food inflation affect edible oil prices?
With food inflation easing to 2.8 percent, it creates a favorable environment for a decrease in edible oil prices as overall consumer spending on food may stabilize.
What role does the monsoon play in pricing?
A stronger-than-normal monsoon is expected to enhance agricultural output, contributing to lower food prices, including edible oils.
What are the major sources of India's edible oil imports?
India primarily imports edible oils from Indonesia and Malaysia, which account for a significant portion of its domestic consumption.
