India examining proposal to raise palm oil import tax

India is examining whether there is a need to raise palm oil import taxes, government and trade sources said, as part of efforts by the world's biggest vegetable oil importer to help millions of its farmers reeling from lower oilseed prices.

Earlier this year, India abolished the basic import tax on crude palm oil (CPO) to keep a lid on prices. New Delhi continues with a 5 percent tax known as the Agriculture Infrastructure and Development Cess on CPO imports.

India also levies a 12.5 percent import tax on refined, bleached and deodorized (RBD) palm oil.

"We are going through a proposal to bring back the duty on crude palm and raise the RBD duty," said a government source who didn't wish to be identified in line with official rules.

"We are going to keep in mind the interests of both farmers and consumers."

The government has also received petitions from the industry to raise the import tax to help prop up falling oilseed prices, the second government source said.

"Soybean and groundnut prices have crashed in the past few months anticipating higher supplies," said BV Mehta, executive director of the Solvent Extractors' Association.

"In some places, the new crops are being sold even below MSPS (minimum support prices)," Mehta said referring to state-set support prices.

Prime Minister Narendra Modi's home state of Gujarat is the top producer of peanuts, popularly called groundnuts.

The government should raise the CPO and RBD import taxes by at least 10 percent to support falling oilseed prices, and the duty differential between CPO and RBD should at least be 12-13 percent to encourage local refining, Mehta said.

India meets more than 70 percent of its vegetable oil demand through imports from Malaysia, Indonesia, Brazil, Argentina, Russia and Ukraine. Palm oil constitutes nearly two-thirds of India's vegetable oil imports.

Addressing a group of farmers on Monday, PM Modi expressed concerns over India's rising vegetable oil import bill and urged growers to boost oilseeds output.