Govt Slashes Import Duty on Crude Edible Oil from 20% to 10% to Reduce Prices – What It Means for Domestic Industries

New Delhi | May 31, 2025 — In a significant policy move aimed at curbing stubborn food inflation and easing pressure on household budgets, the Government of India has announced a sharp cut in the basic customs duty on crude edible oils — from 20% to 10% — effective immediately. The measure is expected to lower prices of essential cooking oils like palm, sunflower, and soybean oil across retail markets while raising fresh concerns among domestic refiners and oilseed growers.

The Ministry of Finance, in a notification released late Thursday, confirmed the reduction as part of a calibrated approach to stabilize the edible oil market, which has been volatile due to a combination of international supply chain issues and domestic production constraints.

Why the Import Duty Was Cut

India is the world’s largest importer of edible oil, meeting more than 60% of its demand from overseas suppliers. Price trends in the international market, coupled with currency fluctuations and local bottlenecks, have significantly influenced domestic retail prices.

Here’s why the government acted:

• Food Inflation: Retail food inflation continues to hover above 6%, with edible oils being one of the key contributors over the past two years.

• Global Price Surge: Global edible oil benchmarks, especially palm and soybean oil, surged earlier this year due to weather disruptions in Indonesia and Latin America.

• Election-Year Pressure: With several major state elections lined up later this year and general elections next year, the government is under pressure to contain inflationary pressures on common household items.

“The duty cut is a targeted step to cool down the prices of edible oils, which directly affect household budgets. It also reflects the government’s commitment to food affordability,”
said an official from the Department of Food and Public Distribution.

Immediate Market Reactions

Following the announcement:

• Edible oil futures on the NCDEX and MCX saw an immediate decline of 2–3%.

• Retailers across metros reported early signs of price moderation, with palm oil down ₹3–5 per litre in wholesale hubs.

• Importers and stockists have begun re-evaluating procurement strategies, anticipating a pickup in volume.

The reduction in customs duty is expected to bring down the final consumer price by ₹8–12 per litre, depending on the oil type and location.

Domestic Industries React: A Mixed Bag

While the move is a relief for consumers, domestic industry stakeholders — especially oilseed farmers, crushers, and refiners — have voiced concerns.

1. Impact on Domestic Oilseed Farmers

The timing of the duty cut coincides with the ongoing oilseed sowing season. Farmer groups warn that this policy may disincentivize oilseed cultivation.

“Lower import duties reduce the price competitiveness of locally produced oilseeds like mustard, groundnut, and soybeans. This could hurt farmer incomes,”
said K.C. Tyagi, National Convener of the Indian Oilseeds Growers Association.

2. Pressure on Refiners and Crushers

India’s refining capacity for edible oil has grown substantially in the past decade, especially in Gujarat, Maharashtra, and Andhra Pradesh. Cheaper imports could lead to under-utilization of this capacity.

“Refiners operating on thin margins will be squeezed further. Imports of ready-to-use crude oil bypass value addition by Indian processors,”
noted Ajay Jhunjhunwala, MD of a large edible oil processing firm in Mumbai.

FMCG and Packaged Food Industry: A Win

For fast-moving consumer goods (FMCG) companies and food processors, this move is welcome news.

• Lower input costs for items like snacks, bakery products, mayonnaise, and ready-to-eat meals.

• Margins for popular brands may improve, or lead to lower prices for consumers.

• Some players have already hinted at passing on the benefit through discounts or value packs.

“Edible oil is a significant cost head for us. Even a ₹5/litre price drop translates to major savings across our supply chain,”
said a spokesperson from Britannia Industries.

Global Suppliers: Indonesia, Argentina, Ukraine Stand to Gain

The duty cut is likely to increase India’s reliance on global suppliers such as:

• Indonesia and Malaysia for palm oil.

• Argentina and Brazil for soybean oil.

• Ukraine and Russia for sunflower oil.

According to trade estimates, India may import an additional 500,000–700,000 tonnes of crude edible oil over the next quarter due to this policy shift.

Long-Term Concerns: Dependency and Trade Imbalance

Economists and trade experts have warned that over-reliance on imports poses systemic risks:

• Current Account Deficit: Edible oil imports cost India over $18 billion in FY24 — the third highest import bill after crude oil and gold.

• Supply Shocks: Disruptions due to geopolitics or climate change in exporting nations can directly spike domestic prices.

• Make in India Challenges: Persistent import duty cuts may contradict the government’s own Atmanirbhar Bharat (self-reliance) goals in agriculture.

“We need a dual approach — short-term relief through import easing and long-term investments in oilseed productivity, storage, and processing,”
emphasized Dr. Shalini Mahajan, Senior Fellow at the Indian Council for Research on International Economic Relations (ICRIER).

Looking Ahead: Will the Prices Stay Low?

The real question is — how sustainable is this price relief?

Key Factors That Will Influence Future Prices:

1. Monsoon Forecast: A favorable monsoon could boost domestic oilseed output and reduce import dependency.

2. Currency Stability: A weakening rupee could offset gains from lower duty.

3. Global Oil Prices: Continued volatility in palm and soy oil benchmarks could limit domestic price drops.

4. Policy Stability: Frequent changes in import duty confuse markets and disrupt planning cycles for domestic producers.

For now, consumers can expect edible oil prices to soften over the next 4–6 weeks. But sustainability will depend on multiple dynamic factors.

Summary: Winners, Losers, and Neutral Stakeholders

Final Word

The government’s decision to halve the import duty on crude edible oil underscores the policy tightrope between inflation control and domestic industry support. While consumers stand to gain in the short run, the long-term health of India’s edible oil ecosystem will depend on how effectively the government balances price stability with incentives for self-sufficiency.

Unless structural reforms in oilseed farming, R&D, and processing capacity are accelerated, India’s edible oil sector risks becoming perennially import-reliant — exposing both farmers and the economy to external shocks.