Drewry Maritime Research
Maritime Research

High tariffs and a weak rupee hit Indian vegetable oil imports - but impact to be short-lived


A sharp rise in import tariffs, and depreciation in the rupee has hurt India’s country’s edible oil imports in recent months, but firm demand during the upcoming festive season is likely to push imports higher in the closing months of 2018.

To support the income of local farmers, India increased the import duty on edible oils in 2018, which in conjunction with a weakening rupee, has resulted in a drop in inbound shipments of vegetable oils in recent months.


Initially, import duty on both crude palm oil and refined palm oil increased by 10% to 44% and 54% respectively on 1 March, 2018, which in turn resulted in a sharp decline in the country’s palm oil imports from 779,000 tonnes in April to 496,000 tonnes in May. However, the import duty on other edible oil did not change and in turn this led to the price differential between palm oil and soybean oil narrowing, plus an increase in imports of other edible oils, particularly soybean in May.


However, once the government increased the duties on other edible oils, including soybean oil, by 5-10% on 15 June, overall imports of edible oil dropped severely in June-July 2018.


The decline in imports has triggered inventory drawdown in recent months. Edible oil inventories which were 2.7 million tonnes at the beginning of June 2018, declined to 2.5 million tonnes at the beginning of August.


India imported 7.1 million tonnes of edible oil during the first six months of the current oil year (i.e. November 2017- April 2018), up 2.1% from the same period of the previous oil year. However, with a drop in imports in June-July 2018, total imports of 10.4 million tonnes during the first eight months of the current oil year (i.e. November 2017-July 2018) were 6% lower when compared with the same period of the previous oil year.


Meanwhile, a sharp decline in international edible oil prices, especially after March 2018, has given some respite to domestic consumers in India. For example, the CIF price of crude palm oil declined by 13% between March and July to $583 per tonne. Similarly, the CIF price of soybean oil has declined by 12% over the same period to $709 per tonne. Elsewhere, the recent decision by Malaysia to remove the 4.5% export tax on crude palm oil to support exports also suggests that palm oil prices in the international market are unlikely to surge anytime soon.


All told, the decline in international prices in recent months and the weakness in the Indian rupee have nullified the impact of higher duties and end user prices in the domestic market in July 2018 were similar to the levels seen during the same period in 2017. This suggests that the recent duty hike is unlikely to dent domestic demand in the absence of any surge in international prices.


In Drewry’s opinion, the recent decline in India’s edible oil imports will be short-lived and imports will increase ahead of the upcoming festive season. According to the estimates provided by the Solvent Extractor’s Association of India (SEA of India), total imports of edible oil in the current oil year will be 14.5 million tonnes. Based on this estimate, average monthly edible oil imports over the last three months of the current oil year (August-October) will rise to around 1.35 million tonnes from 1.05 million tonnes in July 2018.

India's edible oil imports ('000 tonnes)

India's edible oil imports ('000 tonnes)

India's edible oil stocks ('000 tonnes)

India's edible oil stocks ('000 tonnes)

CIF prices of edible oil in India

CIF prices of edible oil in India

Vegoil freight index

Vegoil freight index


Hu Qing

Hu Qing

Lead Analyst, Drewry Maritime Research

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