India’s Edible Oil Duty Cut Balances Inflation Control and U.S. Trade Talks; Domestic Agriculture Faces New Challenges

• CNL Reporter
• June 5, 2025
• News
• India's Edible Oil
• 0 Comments

Mumbai, May 31 (CommoditiesControl.com):

India’s recent decision to reduce import duties on crude edible oils—from 20% to 10%—is being officially presented as a strategic measure to control retail food inflation. However, trade analysts indicate the move also aligns with ongoing trade negotiations, particularly with the United States, potentially averting reciprocal tariffs.

According to reports from the Financial Times and Yahoo Finance, the U.S. has actively urged India to lower import tariffs on critical agricultural commodities. In response, India has selectively reduced duties on less sensitive products, such as almonds and soybean oil, while maintaining protections on cereals and dairy. The current reduction in edible oil duties represents a strategic effort to demonstrate flexibility in trade negotiations.

Although intended primarily to moderate domestic cooking oil prices, the timing and selection of commodities included in the tariff reduction indicate India’s willingness to liberalize trade selectively. By cutting duties on crude palm, soybean, and sunflower oils, India seeks not only to address inflation concerns but also to bolster its negotiating stance in bilateral trade discussions.

This development coincides with a broader decline in global vegetable oil prices, driven by uncertainties around U.S. biodiesel policies and declining international crude oil markets. These factors have already depressed global edible oil prices, significantly impacting Indian oilseed processors and farmers. The recent duty reduction could intensify pressures on domestic growers of mustard, soybean, cottonseed, groundnut, and rice bran, as well as the broader crushing industry.

On the other hand, Indian refiners are poised to benefit significantly from the widened duty differential between crude and refined oils, now standing at 19.25%. This margin enhancement improves refining profitability and could mitigate the competitive challenge posed by zero-duty refined oil imports under trade agreements such as SAFTA, particularly from Nepal.

Trade sources indicate that currently, the landed costs of imported oils remain marginally above domestic spot prices, thus preventing an immediate surge in imports. However, given the recent duty cut and declining global forward prices, this price gap is expected to diminish soon, potentially leading to a notable increase in edible oil imports in the near term.

While the tariff reduction may offer short-term benefits for refiners and diplomatic advantages, it raises concerns regarding the viability of India’s domestic agriculture sector. Without supplementary measures to support oilseed farmers and processors, there is an elevated risk of declining farm-gate prices, reduced crushing margins, and adverse impacts on rural incomes and future domestic oilseed production.

(By Commoditiescontrol Bureau; +91-9820130172)