The SEA proposed either raising import duties on refined oils or reducing those on crude oils, stressing that the existing margin between the two—currently 27.5 per cent on crude oil and 35.75 per cent on refined oil—is insufficient to support the domestic industry
India’s vegetable oil industry has urged the government to widen the tariff differential between crude and refined oils to curb the growing influx of refined oil imports and protect local refineries. The Solvent Extractors Association of India (SEA) highlighted that the surge in refined palm oil imports from Indonesia and Malaysia has significantly reduced refinery utilization rates and negatively impacted local employment in the sector.
To address this issue, SEA has recommended either raising duties on refined oils or lowering them on crude oils, pointing out that the current tariff gap is too narrow. At present, India levies a 27.5 per cent import duty on crude vegetable oils and 35.75 per cent on refined oils, creating a relatively small difference of 8.25 per cent.
Historically, India’s tariff structure has evolved to support both import protection and domestic growth in refining capacity. In 2018, the import duty on crude palm oil was raised to 15 per cent, with refined palm oil duties set at 25 per cent, to encourage local refining. However, in the following years, the gap between duties on crude and refined oils continued to shrink, with refined oil imports rising despite these adjustments.
In 2020, the import duties on crude and refined oils were further increased but remained relatively close. This narrowing gap has incentivized traders to import more refined oils, which are subject to a lower effective tariff, negatively impacting domestic refiners’ profitability and utilization rates.
India, which imports approximately two-thirds of its vegetable oil needs, continues to be highly reliant on imports. SEA’s call for a greater tariff gap reflects the need for a more strategic policy to bolster local refineries and reduce dependency on imported refined oils.
