Asia

India Increases Duties on Olive Oil Again

The Indian government continues its trend of raising import duty rates on olive oil.

Apr. 3, 2018
By Isabel Putinja

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On Feb­ru­ary 1, Indian finance min­is­ter Arun Jait­ley announced that duties for extra vir­gin and vir­gin olive oil were increas­ing from 12.5 per­cent to a whop­ping 30 per­cent, while those for refined olive oil (olive oil and olive pomace oil) would jump from 20 to 35 per­cent.

These duties are exces­sive look­ing at the fact that India doesn’t pro­duce any com­mer­cial level olive crop.- Rahul Upad­hyay, Indian Olive Asso­ci­a­tion

Olive oil was included on a long list of edi­ble veg­etable oils sub­ject to the increase which also included ground­nut (peanut), cot­ton­seed, saf­flower seed, saf­fola, coconut, palm ker­nel, lin­seed, corn, cas­tor and sesame oils.

While some praised the gov­ern­men­t’s move as a way to safe­guard the inter­ests of domes­tic pro­duc­ers, the Indian Olive Asso­ci­a­tion (IOA) called the increase exor­bi­tant and extra­or­di­nary”. There is no domes­tic pro­duc­tion of olive oil in India; hence there are no domes­tic farm­ers who are affected by olive oil imports or who need pro­tec­tion,” the asso­ci­a­tion stated in a press release dated Feb­ru­ary 1.

The IOA press release also points out other rea­sons the move is illog­i­cal when it comes to the olive oil indus­try. While prices of other types of edi­ble oil have declined in India in recent years, the cost of olive oil from sup­plier coun­tries like Spain and Italy has increased in the past two years because of a fall in pro­duc­tion. Also, the appre­ci­a­tion of the Euro against the Rupee has resulted in an even higher cost for Indian importers.

Indian import duties imposed on olive oil have been steadily increas­ing since 2014 when the gov­ern­ment launched its Made in India” pro­gram with the aim to encour­age domes­ti­cally man­u­fac­tured goods. Duties on olive oil increased from 0 per­cent for crude oil and 7.5 per­cent for refined oil in 2013, to 7.5 and 15 per­cent respec­tively in 2015, before fur­ther ris­ing to 12.5 and 20 per­cent in 2017.

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The newly intro­duced rates for 2018 of 30 and 35 per­cent are also sub­ject to an addi­tional 10 per­cent import cess.” Rahul Upad­hyay, vice-pres­i­dent of the IOA, told Olive Oil Times that these duties are exces­sive. Today the duties includ­ing the new 10 per­cent import cess intro­duced in Feb­ru­ary 2018 are 33 per­cent on crude vari­ants like extra vir­gin and vir­gin, and almost 39 per­cent on refined vari­ants like olive oil and olive pomace oil,” he con­cluded. These duties are exces­sive look­ing at the fact that India doesn’t pro­duce any com­mer­cial level olive crop. How­ever, the Indian gov­ern­ment is not dif­fer­en­ti­at­ing olive oil from other oils. India imports 65 per­cent of its edi­ble oil require­ment where the major share is that of palm, sun­flower and soy­bean oils.”

The increased cost of olive oil from source coun­tries, the strong Euro, and record import duty rates mean Indian con­sumers can expect higher prices at the super­mar­ket. For olive oil it’s a triple whammy that has increased the retail prices sub­stan­tially,” added Upad­hyay. Prices on retail shelves are almost 50 to 60 per­cent higher than last year and will go up fur­ther due to this recent cus­tom duty increase.”

The IOA has asked the Indian gov­ern­ment to reduce the import duties on olive oil, cit­ing the fact that there are no domes­tic olive pro­duc­ers to pro­tect while also point­ing out the poten­tial health ben­e­fits of olive oil in a coun­try that ranks first in the world for car­diac dis­ease and dia­betes.

The government’s effort should be to make the prod­uct increas­ingly acces­si­ble to the Indian con­sumer given its over­ar­ch­ing and uni­ver­sally accepted health ben­e­fits. Instead, it’s mis­con­ceived and mis­guided actions are result­ing in exactly the oppo­site,” con­cluded the asso­ci­a­tion’s Feb­ru­ary 1st press release.

Despite the ever-increas­ing cost of olive oil in recent years, sales in India have sur­pris­ingly not fallen and actu­ally remained sta­ble, con­firmed Upad­hyay. It is evi­dent that there seems to be a short-term impact in import vol­umes, but that may be due to high prices at ori­gin last year,” he said. Retail vol­umes, how­ever, are sta­ble it seems. The big­ger rea­son for the growth of the mar­ket over the last few years was a 5‑year mar­ket­ing cam­paign by EU and ASOLIVA to pro­mote olive oil in India. This cam­paign ended over a year ago. Since then the mar­ket has not grown much and the prices haven’t helped either.”

Despite this slow­ing down of the con­sumer olive oil mar­ket and con­tin­u­ally climb­ing prices, Upad­hyay remains opti­mistic and sees the poten­tial for fur­ther growth. The Indian econ­omy and con­sumer story con­tinue to be strong. Major reg­u­la­tory changes such as the GST (Goods and Ser­vices Tax) are also done with, so the future looks great for FMCG (fast-mov­ing con­sumer goods) growth. With that, the stage is also set for growth in the olive oil story in India.”

With some price cor­rec­tion at the ori­gin and another mar­ket­ing effort by EU and ASOLIVA, we feel the Indian olive oil mar­ket will con­tinue to grow at over 30 per­cent a year in vol­ume terms,” Upad­hyay said.





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