The government is expected to raise import duty on refined edible oil to 10%, from 7.5% at present, to protect the domestic oil refining industry.
A Cabinet note regarding this has already been circulated by the Food Ministry, sources said. The move is aimed at protecting domestic players who are into refined edible oil business, they added.
Currently, the cost of imported refined edible oil is lower than that of crude edible oil due to inverted duty structure adopted by exporting countries like Indonesia and Malaysia. These exporting nations are giving export duty benefits for finished products to their traders.
Inverted duty structure impacts the domestic industry adversely as it has to pay a higher price for raw material in terms of duty, while the finished product lands at lower duty and costs low.
Import duty on crude edible oil is about 2.5%, while on refined oils is 7.5%.
"The food ministry has circulated a note for the consideration of the Cabinet Committee on Economic Affairs. Increase in import duty on refined oil is always good for domestic players who import crude oil," a source in the commerce ministry told PTI.
Due to such inverted duty structure, Indian traders are favouring import of refined edible oil rather than of crude oils, the source said.
India, the world's second largest cooking oil importer, purchased 2.78 million tonnes of edible oil from the global market between November 2012 and January, this year.
Industry body Solvent Extractors Association (SEA) has been demanding a hike in import duty of refined oils to 12.5% to curb imports and protect domestic refineries.
In January this year, the government imposed a duty of 2.5% on crude oil from zero duty earlier.
According to media reports, the share of crude oil in the overall vegetable oil imports of the country has declined from 84 per to 58% during the last two months.
Currently, domestic edible oil crushing and refining units are operating at 30-35% capacity, against about 50% a year ago.
