NEW DELHI: India, the world’s top importer of vegetable oil, will have to spend billions of extra dollars this year to buy more costly cooking oil from overseas and is mulling cutting taxes on those imports to soften the blow to the economy, industry officials have said.

The government is considering reducing taxes on vegetable oil imports after cooking oil prices hit record highs last month as it seeks to make food costs more affordable for its population of over 1.3 billion and keep price pressures at bay.

WHY HAVE GLOBAL EDIBLE OIL PRICES RALLIED SO MUCH?

Problems in the global production of key oilseeds coupled with rising biodiesel use have fuelled the global vegoil rally.

Soyaoil futures have jumped more than 70% this year after drought tightened US and Brazilian soyabean supplies. The US Department of Agriculture has forecast global soyabean stocks will fall to a five-year low of 87.9 million tonnes by September.

Palm oil prices, the most widely consumed edible oil, also rallied 18% in 2020 after COVID-19 lockdowns curbed output from plantations in Southeast Asia.

Benchmark futures in Malaysia touched 4,142 ringgit ($1,007.30) a tonne in mid-March, their highest since 2008.

Poor rapeseed and sunflower seed harvests in Europe and the Black Sea region further tightened edible oil supplies, helping push global food prices to 10-year highs last month.

Mirroring record global prices, domestic palm oil and soyaoil rates have more than doubled in the past year.

WHY IS INDIA CONCERNED?

As the top edible oil importer, India spends an average of $8.5-$10 billion annually on imported vegoils and the recent price surge will only inflate its bloated import bill further. Vegetable oil is India’s third-biggest import item after crude oil and gold. India’s vegetable oil imports have surged to 15 million tonnes from 4 million only two decades ago, according to industry estimates.