Dynamics of Palm Oil Import on Prices, Income and Trade of Indian Edible Oil Sector

The present study aims to capture the implications of palm oil import on the Indian edible oil sector in terms of price, income and international trade. Being the net importer of edible oil over a long period, import tariff simulations on palm oil, which constitute a major share of our import basket on the domestic producer price, consumer price, income of the domestic edible oil processing industry and government revenue were studied under by partial equilibrium setting. The domestic edible oils considered for the study were palm oil, soybean oil, rapeseed and mustard oil, sunflower oil and other major traditional oils viz., coconut oil, groundnut oil and cotton seed oil - categorised as other edible oils. The import of palm oil had significant influence on the domestic edible oil sector indicating the higher substitutability of palm oil owing to its low price and compatibility to blend with domestic edible oils. The variation in domestic production, consumer price, industry income and government revenue were in the same direction as that of tariff and import price of palm oil. Domestic consumers are the major beneficiaries of reduction in tariff and import price of palm oil, while processors benefitted more than the producers of domestic oils from hike in tariff and import price. The import policy must aim at protecting the welfare of all the stakeholder of edible oil sector, viz., producers, processors and consumers.