Chennai: Despite import duty reduction, edible oil prices are likely to remain elevated during the festive season due to tight global supply, fuel blending mandate, higher shipping costs and weaker rupee.
The government had reduced import duties of different edible oils by around 5 to 10 per cent to cool prices ahead of the festive season.
The decision to reduce custom duty was driven by the need to arrest food inflation amid geo-political disruptions and weak monsoons.
Domestic edible oil prices had surged around 20% in 1HFY27, led by an increase in international prices and rupee depreciation, given India’s high import dependency.
The reduction in the basic custom duties translates into a 4%-5% reduction in the landed cost of palm and soybean oils.
The impact is likely to be higher for sunflower oil as the effective duty has been reduced to 5.5% from 16.5%. However, the extent of transmission will be contingent on international price movements in response to the duty cut, as India is a large importer, finds India Ratings and Research.
Apart from consumers, the price reduction would provide some relief to FMCG products because palm oil and its derivatives form a major component in various bakery and FMCG products such as biscuits, cakes, chocolates, cosmetics, soap, and detergents.
However, prices are likely to remain higher due to tight global demand-supply balance.
This will be driven by the fuel blending mandates and looming El-Nino threat on output.
Supply chain disruptions affecting trade flows and shipping costs, and weaker Indian rupee will also put pressure on prices.
Global palm oil prices rose around 15% to nearly $1,300/mt in 1HFY27. Global palm oil production is expected to be flattish in the 2026-27 season.
However, consumption is likely to grow 2%-3%, supported by the rising biodiesel demand in Indonesia and reduction in exportable surplus.
Further, the import duty cut would lead to higher imports ahead of the festive season. As a result, global palm oil prices may remain elevated in 2026.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: deccanchronicle.com
