Citing desire to control prices of palm oil, the Federal Government announced that it will cut customs duty on both crude and refined palms oil and plamolein by 10% to 70% that is estimated to cost the nation Rs. 650 crore (USD 141 million).
Reports quoting a Central Board of Excise & Customs (CBEC) spokesperson said that the duty cut is to offset global increase in edible oil prices and the Government is anticipating that prices will drop by Rs. 2 a kilogram. Also, since expected tariff value of oil imports is expected to rise, the CBEC anticipates achieving a neutral revenue stream even with the duty cut. Interestingly, the Government had increased duties on palm oil imports from 65% to 80% in February 2005.
Recently, the Government reduced customs duty on wheat, sugar, and pulses imports from duty in the hope to increase supply of these products to control inflation. However, it has not stated how it plans to cover the loss of revenue from these duty cuts.
It is also not clear if the duty cut is anyway to appease Malaysia which has given India grief over the Association of South East Asian Nations (ASEAN) free trade agreement by
unfairly demanding large duty cuts for palm oil. Malaysia is one of the largest exporters of palm oil.