New Delhi: Edible oil and flour maker Adani Wilmar could raise prices of cooking oil by at least 20% in the current quarter following the government’s move to impose higher import duties on refined oils.
On 14 September India raised the basic import tax on crude and refined edible oils.
Basic customs duty on crude soybean oil, crude palm oil, and crude sunflower oil was hiked to 20% from 0%, resulting in an effective duty rate of 27.5% on crude oils. Basic customs duty refers to a tax on imported goods to protect domestic industries by making imports more expensive.
Similarly, the basic custom duty on refined palm oil, refined sunflower oil, and refined soybean oil has been raised to 32.5% from 12.5%, with an effective duty rate of 35.75% on refined oils.
Adani Wilmar sells edible oils such as soya, sunflower, mustard, rice bran, groundnut and cottonseed. The company also sells basmati rice and wheat flour among other kitchen staples.
22% hike likely?
“By all means, if edible prices internationally remain steady, a 22% hike will be there,” Angshu Mallick, MD & CEO, Adani Wilmar Ltd said during a virtual interview with Mint Wednesday.
On Thursday, the company announced its earnings for the September quarter. The edible oil segment revenue grew by 21% year-on-year to ₹10,977 crore, with an underlying volume growth of 17% year-on-year.
The demand for edible oil in the September quarter was “stable”, the company said. The company has been working on expanding the distribution of its products in tier two and tier three markets.
However, the company may pass on price hikes to consumers “gradually” in the December quarter. “The duty hike came on 14 September, after that edible oil (prices) started increasing, and as in any commodity, when you buy at a higher price, you also pass on the price. But we don’t do it in one go. We will do it very gradually. You need to pass it on in several steps, which we have started doing and the third quarter (December quarter) is when the real impact will be seen,” he said.
This could impact volumes in the current quarter, Mallick added.
Mallick countered the reports from major consumer companies like Hindustan Unilever Ltd and Nestle India Ltd, stating that urban demand for its portfolio of kitchen staples has not been as challenging. Rural demand, on the other hand, remained strong due to the favourable monsoon.
The company is, however, keeping an eye on wheat prices.
“Wheat prices have gone up steadily. I think it is reaching its peak, by November-December it reaches the peak, after which it starts coming down. The government may come out with some scheme to release some wheat in the open market. So wheat prices, I think, might remain steady, because the next wheat crop is going to be very good—water table is very good, the soil condition is very good and overall the rabi crop is going to be very good,” he said.
