India, the world's largest importer of edible oils, has halved import duties on crude palm oil and crude soybean oil to ease domestic price pressure ahead of the festive season.
The Indian Ministry of Finance issued a notification on Wednesday evening stating that tariffs on the two oil categories would be reduced from 10% to 5%, while the tariff on unrefined sunflower oil would be scrapped entirely. Taxes on refined edible oils were also lowered.
About 60% of India's edible oil is imported, making consumers in the world's most populous nation highly vulnerable to fluctuations in global vegetable oil prices.
Supply disruptions caused by the Black Sea conflict, combined with rising biofuel demand, have tightened market supply and pushed vegetable oil prices to four-year highs.
Sudhakar Desai, president of the Indian Vegetable Oil Producers' Association, said: "The top priority now is to ensure adequate edible oil supply across the country during the upcoming festive months." He said the tariff adjustment is expected to boost the competitiveness of sunflower oil.
India's festive season begins in September and culminates with Diwali in November. Food consumption rises during this period as people make large quantities of traditional sweets and fried foods, pushing demand for sugar and edible oil to its peak.
After the tariff news was announced, benchmark palm oil futures in Kuala Lumpur rose as much as 0.9%, ending a four-day losing streak.
However, Anilkumar Bagani, research head at Sunvin Group in Mumbai, believes that higher-than-expected production in major producer Malaysia limits further upside for palm oil. Bagani said: "Despite the tariff cut, output exceeding expectations and continuously accumulating inventories make it difficult for palm oil prices to rise." He also noted that Indian importers had previously delayed unloading cargoes while waiting for the tariff reduction, and arrivals are expected to increase over the next two weeks, further replenishing inventories and curbing new overseas purchases.