Centre Halves Duty on Crude Palm and Soybean Oil to 5%, Scraps Crude Sunflower Oil Duty

The news

New Delhi. The Centre has cut the basic customs duty on crude and refined edible oils, including palm, soybean and sunflower oil, with effect from Thursday, September 24, 2026, to reduce import costs and potentially ease domestic prices, The Economic Times reports. Basic customs duty is the core tariff charged on goods entering India. The duty on crude soybean oil and crude palm oil has been halved to 5%, and the duty on refined soybean and palm oils cut to 27.5% from 32.5%. For sunflower oil, the government has scrapped the 10% duty on crude imports altogether, while the duty on refined sunflower oil has been lowered to 22.5% from 32.5%. Crude oil here means unrefined oil that Indian refineries process into the packaged cooking oil sold in shops; refined oil arrives ready for packing. The paper says the move is expected to reduce the landed cost of edible oils (the price of an import once it reaches an Indian port, including freight and duty), which could pass into lower domestic prices and give some relief on food inflation. India is among the world’s largest edible oil importers, so global commodity prices, freight costs and the exchange rate are important determinants of domestic edible oil inflation. The report does not say whether any cess on these imports has changed, and it gives no estimate of the revenue given up. The cut comes as price pressure builds. In a separate report the ET notes that retail inflation rose to 4.8% in August from 4.5% in July, that the Asian Development Bank expects inflation to average 5% in FY27 and names El Niño-related disruptions as a key risk, and that the OECD sees a weaker monsoon as a threat to farm output. It also comes as the kharif oilseed crop reaches the market in a bad year: The Indian Express reports that soybean and cotton are the worst-hit crops of Maharashtra’s drought. On the ET’s figures, the gap between the crude and refined duty is 22.5 percentage points for all three oils, exactly as it was before the cut. The syllabus link is GS3: agricultural pricing, food security, inflation and the effect of trade policy on farmers and consumers.

Static syllabus linkage

1. Customs duty is a Union levy whose effective rate the executive can change overnight. “Duties of customs including export duties” fall under Entry 83 of the Union List, so only the Union can levy them. The charging provision is Section 12 of the Customs Act, 1962, and the statutory rates are in the First Schedule to the Customs Tariff Act, 1975. Section 25(1) of the Customs Act lets the Union government, in the public interest, exempt goods wholly or partly from duty by notification, which is how the rate actually charged is cut without Parliament amending the Schedule. The Finance Act, 2021 added a separate Agriculture Infrastructure and Development Cess on imports that included crude palm, soybean and sunflower oils; as a cess, its proceeds stay outside the divisible pool that Article 270 shares with the States.
2. India buys more than half its cooking oil abroad, and the gap has lasted three decades. According to a PIB note on the National Mission on Edible Oils, India’s import dependence for edible oil was 56.25% in 2023-24, down from 63.2% in 2015-16, with imports of 15.66 million tonnes in 2023-24. Palm oil, mostly from Indonesia and Malaysia, is the largest single import; soybean oil comes mainly from Argentina and Brazil, and sunflower oil from the Black Sea region, chiefly Russia and Ukraine. India grows nine annual oilseeds: groundnut, rapeseed-mustard, soybean, sunflower, sesamum, safflower and niger, which are edible, and castor and linseed, grown mainly for industrial use. Most are grown on rain-fed land by small farmers, which keeps yields low and output volatile.
3. Self-sufficiency was won once through the Yellow Revolution and lost when imports were opened. The Technology Mission on Oilseeds, launched in 1986, combined better seed, extension, processing support and price assurance, and the resulting ‘Yellow Revolution’ made India nearly self-sufficient in edible oils in the early 1990s; a PIB note credits price support and import substitution. Once imports were liberalised in the 1990s, cheaper palm and soybean oil displaced domestic oil and dependence climbed again. The National Mission on Edible Oils–Oil Palm (NMEO-OP), approved in 2021 with ₹11,040 crore (₹8,844 crore Central share), targets 6.5 lakh hectares of new oil palm by 2025-26 with a special focus on the North-East and the Andaman and Nicobar Islands, and guarantees farmers a viability price for fresh fruit bunches against swings in world crude palm oil prices. The National Mission on Edible Oils–Oilseeds, approved in October 2024 for 2024-25 to 2030-31 with ₹10,103 crore, aims to raise primary oilseed output from 39 million tonnes in 2022-23 to 69.7 million tonnes by 2030-31; per the PIB, the two missions together aim to meet about 72% of projected edible oil requirement by then.
4. MSP protects the oilseed farmer only where the state actually buys. Minimum support prices are recommended by the Commission for Agricultural Costs and Prices (CACP), a non-statutory attached office of the Ministry of Agriculture and Farmers Welfare, and approved by the Cabinet Committee on Economic Affairs; since 2018-19 they have been set at no less than one and a half times the A2+FL cost of production. The oilseeds covered are groundnut, soybean, sunflower seed, sesamum and nigerseed in kharif, rapeseed-mustard and safflower in rabi, and copra. An MSP works only where an agency procures. The Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA) of 2018 has three parts: the Price Support Scheme, under which agencies such as NAFED buy pulses, oilseeds and copra at MSP; the Price Deficiency Payment Scheme, which pays the gap between MSP and the market price, on the model of Madhya Pradesh’s Bhavantar scheme; and a pilot Private Procurement and Stockist Scheme. A lower import duty therefore lowers the market price that PM-AASHA must then make up.

Why UPSC loves this

1. The GS3 syllabus puts MSP, subsidies and food security in one line. The GS3 syllabus lists “issues related to direct and indirect farm subsidies and minimum support prices” alongside the public distribution system, buffer stocks and food security, and separately asks about the effects of liberalisation. Mains questions keep returning to import dependence in pulses and edible oils and to crop diversification away from rice and wheat. A duty cut on edible oil is a clean case study because it forces the answer to weigh the consumer against the producer.
2. Prelims tests the legal route and the scheme design, not today’s rate. UPSC will not ask this week’s duty on crude palm oil. It can ask how the rate is changed (an exemption notification under the Customs Act), whether a cess is shared with States, which regions NMEO-OP targets, what a viability price is, and what PM-AASHA contains. The status of the CACP, the crops covered by MSP and the colour-coded ‘revolutions’ remain favourite formats.
3. Inflation control now uses trade tools as much as the policy rate. Duty cuts, stock limits and export curbs have become a routine part of inflation management; this magazine’s September 19 card covered reworked sugar and onion stock limits. A GS3 answer on food inflation should show that monetary policy works on demand while these tools work on supply, and that each has a cost: a duty cut gives up revenue and depresses farm prices.

Analysis

1. The cut protects Indian refiners as carefully as it helps Indian consumers. On the ET’s figures, the gap between the crude and refined basic customs duty was 22.5 percentage points for all three oils before the cut (10% against 32.5%) and is still 22.5 points after it (5% against 27.5% for palm and soybean, zero against 22.5% for sunflower). The government has lowered the whole ladder without shortening the step, so refined imports gain nothing relative to crude. That is deliberate: per a PIB release, when the Centre cut crude-oil duty from 20% to 10% in 2025, it said the aim was to use domestic refining capacity and discourage refined imports, and it widened the effective gap from 8.75 to 19.25 percentage points. Keeping the step keeps refining jobs and value addition in India. The counter-view is that consumers would gain more if refined oil were cheaper too, but a country that imports over half its oil has good reason not to import the processing as well.
2. A duty cut is a transfer whose final destination is uncertain. The ET is careful to say the cut “could” give relief and is “expected” to lower landed cost, and it names world prices, freight and the exchange rate as other drivers. When a buyer as large as India cuts its tariff, world demand rises, and part of the benefit can go to exporters who raise prices; Indonesia and Malaysia have in the past adjusted their own palm oil export duties to suit their markets. Another part can stay with importers and refiners who do not cut wholesale and retail prices. This is why, per PIB, the 2025 cut came with an advisory asking edible oil associations to pass the benefit on and report maximum retail prices weekly. The test of today’s measure is the price of a one-litre pack a month from now.
3. The timing lands on the soybean farmer at the worst moment. Soybean reaches the mandis in October, and The Indian Express reports it is among the worst-hit crops of Maharashtra’s drought. A farmer who loses half a crop is usually partly compensated by a higher price for what remains, because shortages raise prices. Cheaper imported oil caps the price of soybean oil and so of the bean, leaving the drought-hit farmer with a low yield and a capped price at once. The episode also repeats a cycle: the same PIB release refers to a September 2024 duty hike, which came when soybean prices were below MSP, followed by cuts in 2025 and now 2026. A farmer cannot plan around a tariff that changes direction every year, and that uncertainty undercuts the self-sufficiency NMEO-Oilseeds is paying for.
4. The right tool for protecting the farmer is procurement, not the tariff. If consumer relief is the priority, the honest way to protect oilseed growers is to pay them directly rather than tax every kitchen. PM-AASHA’s Price Support Scheme lets NAFED and other agencies buy oilseeds at MSP, and the price-deficiency route pays farmers the gap without the state storing the crop. A tariff protects everyone who sells oilseeds, including large traders, and every consumer pays for it; procurement targets the producer and its cost appears openly in the budget. The counter-view is that oilseed procurement has been thin outside a few States, and Madhya Pradesh’s Bhavantar scheme was criticised because traders pushed prices down during the payment window. Both criticisms argue for better procurement, not for using the customs tariff as price support.
5. Import dependence is a strategic risk, and oil palm is not a free answer. India’s edible oil comes from a few countries, and the shocks have been real: Indonesia’s temporary ban on palm oil exports in 2022 and the war in Ukraine, which disrupted Black Sea sunflower oil, both pushed up Indian prices. That is the case for NMEO-OP’s push into oil palm, which yields far more oil per hectare than annual oilseeds. The counter-case is ecological: oil palm needs a lot of water, and planting it in the biodiversity-rich North-East risks repeating the forest loss seen in South-East Asia. A balanced strategy would push harder on the yields of soybean, mustard and groundnut on existing farmland, where Indian yields remain well below world averages.

Administrator's brainstorm