Following the recent hike in import duty on crude oil and refined oil, consumers have started feeling the impact of inflation in key kitchen items like edible oil.
According to the price monitoring cell of the consumer affairs department, the model or benchmark retail price of mustard, sunflower and palm oil, commonly used in Indian kitchens, rose to Rs 148 per litre, Rs 129 per litre and Rs 110 per litre on Tuesday from Rs 140, Rs 120 and Rs 100 per litre, respectively, on September 13. This is an increase of 5-10% since the duty hike was announced 12 days ago.
Retail inflation in the oils and fats category had been in the negative territory since February 2023.
But due to the duty hike, the mandi price of soybean and mustard has gone above the minimum support price (MSP) in the last one week as edible oil manufacturers will now have to procure from the domestic market instead of importing from abroad.
Companies FE spoke to said the surge in domestic oilseed prices would further push up inflation, with overall prices expected to rise by 15-20%. This would include at least one more price hike in addition to the current one, industry sources said.
Both the government and the companies are apprehensive about the impact of the price hike on consumption, due to which the Food Ministry has urged edible oil manufacturers to maintain the current price of edible oils until imported oil is available at a lower duty.
This week, the Solvent Extractors Association of India, the apex body of edible oil manufacturers, asked its members to avoid raising prices of old stocks and maintain retail prices during the festive period.
“The buffer stock will last for about a month and a half. After that, edible oil companies may not be able to maintain prices as seed prices remain high due to the import duty hike,” said a senior official of an edible oil company, who declined to be named due to the sensitivity of the matter.
Import duty has been hiked on palm, soybean and sunflower oils, which are imported in substantial quantities into the country, while retail prices of mustard oil have also increased in the last one week due to “cascading impact” on the basket of vegetable oils.
Umesh Verma, spokesperson for P-Mark, a leading mustard oil brand, told FE, “The recent rise in mustard oil prices is mainly due to changes in the global market for edible oils. When the price of other oils like soybean or palm oil rises due to high demand or supply problems, people turn to mustard oil, which also increases its price.”
Verma said as the festival season approaches and more people buy mustard oil for health benefits, the higher demand, especially when supply is low, leads to price rise.
The duty on crude palm, soybean and sunflower oils has been increased to 27.5% from the current level of 5.5%. While the duty on refined edible oil has been increased from 13.75% to 35.75%, which means a net increase of 22% on both crude and refined edible oil.
