Consider the following statements: 1. The quantity of imported edible oils is more than the domestic production of edible oils in the last five years. 2. The Government does not impose any customs duty on all the imported edible oils as a special case. Which of the statements given above is/are correct?

Updated 11 Apr 2026 · From UPSC Prelims GS Paper I 2018, Q69

Contents12
UPSC Prelims GS2018Indian Economy
  1. A1 only
  2. B2 only
  3. CBoth 1 and 2
  4. DNeither 1 nor 2
Show answer

Answer: (A) 1 only

Correct Answer: (a) 1 only

  1. Statement 1 is CORRECT: India imports more edible oil than it produces domestically.

    India produces only about 40% of its edible oil needs and imports the remaining 60%.

    This heavy dependence on imports has been a long-standing issue.

  2. Statement 2 is WRONG: The government DOES impose customs duty on imported edible oils.

    This is done to protect Indian farmers and the domestic oil-crushing industry.

    For example, crude soyabean oil attracts 30% duty, while crude sunflower and mustard oils attract 25% duty.

    So there is no 'exemption' — it's the opposite.

REMEMBER: India imports ~60% of its edible oil (more than it produces).

Government charges customs duty on edible oil imports to protect local industry.

Why this was asked

India imports approximately 60% of its edible oil needs, making it one of the world's largest edible oil importers with heavy dependence on countries like Indonesia and Malaysia.

The government actively uses customs duty on edible oils as a policy tool to protect domestic farmers and oil-crushing industries, with rates typically ranging from 25-30% on crude oils.

This question tests understanding of India's agricultural import dependence and trade policy mechanisms rather than just taxation knowledge.

India's Edible Oil Import Dependency

Indian Economy imported edible oils domestic production edible oils

India's Edible Oil Import Dependency: Production vs Consumption Gap

Must know

India imports ~60% of its edible oil needs, producing only ~40% domestically

Major imported oils: palm oil, soybean oil, sunflower oil

Good to know

Key suppliers: Indonesia, Malaysia, Argentina, Ukraine

Import dependency creates food security and trade deficit concerns

India faces a massive production-consumption gap in edible oils. Despite being an agricultural economy, domestic oilseed production cannot meet rising demand due to limited cultivable area, low productivity, and changing dietary patterns.

Domestic vs Import Share

Component

Share (%)

Key Details

Domestic Production

~40%

Mainly mustard, groundnut, sesame, coconut oils

Imports

~60%

Palm oil (50% of imports), soybean, sunflower oils

Consumption Growth

3-4% annually

Driven by population and income growth

Why Import Dependency Persists

Limited land expansion for oilseeds due to food grain priority

Lower yields compared to global averages in most oilseeds

Palm oil dominance in imports (cheap, versatile, not grown in India)

Changing consumption patterns toward refined oils over traditional oils

Exam traps

Trap: Assuming India is self-sufficient in edible oils because it's an agricultural country

Trap: Confusing oilseed production data with edible oil extraction rates

Remember: Statement 1 was correct - imports exceed domestic production consistently

Customs Duty on Edible Oil Imports

Indian Economy customs duty imported edible oils

Customs Duty Structure on Imported Edible Oils

Must know

Government DOES impose customs duty on imported edible oils - no blanket exemption

Duty rates: Crude oils 25-30%, Refined oils higher

Purpose: Protect domestic farmers and oil-crushing industry

Good to know

Rates are frequently adjusted based on domestic prices and supply situation

The government uses customs duty as a policy tool to balance consumer prices with farmer protection. Contrary to Statement 2, there is no blanket exemption - duties are actively managed to support domestic industry.

Typical Duty Structure

Oil Type

Crude Oil Duty

Refined Oil Duty

Policy Rationale

Soybean Oil

30%

35%

Protect domestic soybean farmers

Sunflower Oil

25%

35%

Encourage domestic crushing

Palm Oil

25-40%

45-50%

Most variable, depends on domestic prices

Mustard Oil

25%

35%

Protect traditional oilseed farmers

Policy Objectives Behind Duties

Protect domestic oilseed farmers from cheap import competition

Encourage domestic oil-crushing industry through crude-refined duty differential

Generate revenue for the government from high-volume imports

Price stabilization by adjusting duties based on domestic market conditions

Exam traps

Major Trap: Statement 2 claimed no customs duty - this is completely wrong

Remember: India actively uses import duties on edible oils, not exemptions

Confusion source: Mixing up duty rate changes with complete exemptions

Oilseeds Production in India

Indian Economy domestic production

Major Oilseeds Cultivation & Production Patterns in India

Must know

Major oilseeds: Soybean, mustard, groundnut, sunflower, sesame

Madhya Pradesh leads in soybean, Rajasthan in mustard production

Good to know

Kharif season dominates with soybean and groundnut

India ranks 4th globally in oilseeds production but has low extraction rates

India grows diverse oilseeds across kharif and rabi seasons but faces challenges in extraction efficiency and yield optimization. The gap between seed production and oil extraction contributes to import dependency.

Major Oilseeds by Season

Oilseed

Season

Top Producing States

Oil Content (%)

Soybean

Kharif

Madhya Pradesh, Maharashtra, Rajasthan

18-20%

Mustard

Rabi

Rajasthan, Haryana, Madhya Pradesh

38-42%

Groundnut

Kharif/Rabi

Gujarat, Andhra Pradesh, Tamil Nadu

45-50%

Sunflower

Kharif/Rabi

Karnataka, Andhra Pradesh, Maharashtra

38-42%

Sesame

Kharif

West Bengal, Rajasthan, Uttar Pradesh

50-55%

Production Challenges

# Low Oil Extraction Efficiency
## Yield Issues
- Low per-hectare productivity
- Rain-dependent cultivation
- Limited irrigation
## Processing Gaps
- Traditional extraction methods
- High oil retention in cake
- Limited modern crushing capacity
## Policy Constraints
- Minimum Support Price gaps
- Food grain priority in land use
- Limited research investment
Exam traps

Trap: Confusing oilseed production ranking with oil self-sufficiency

Remember: High oilseed production ≠ high edible oil availability due to extraction efficiency

Key distinction: Seed production vs actual oil extraction capacity

Agricultural Import Policy Framework

Indian Economy

India's Agricultural Import Policy: Balancing Protection & Consumption

Must know

Policy balances farmer protection with consumer affordability

Uses tariffs, quotas, and quality standards as policy tools

Good to know

WTO commitments limit maximum tariff rates on agricultural products

Strategic imports needed for pulses, edible oils, and some fruits

India's agricultural import policy seeks to protect domestic farmers while ensuring food security and reasonable consumer prices. The approach varies by commodity based on domestic production capacity and strategic importance.

Import Policy by Commodity Type

Commodity Category

Policy Approach

Key Tools Used

Example Products

High Self-Sufficiency

Restrictive

High tariffs, quality barriers

Rice, wheat, sugar

Strategic Deficits

Managed Imports

Variable tariffs, buffer stocking

Pulses, edible oils

Seasonal/Premium

Open with Duties

Moderate tariffs, seasonal adjustments

Fruits, nuts, spices

No Domestic Production

Liberal

Low/nil tariffs

Dates, certain tropical fruits

Policy Instruments Used

Customs duties - primary tool for price and volume control

Import quotas - used selectively for sensitive commodities

Phytosanitary standards - quality and safety-based restrictions

Minimum Import Price (MIP) - floor price mechanism for select items

Exam traps

Trap: Assuming uniform import policy across all agricultural products

Remember: Policy varies significantly by commodity and domestic production status

Key insight: Even deficit commodities like edible oils face import duties, not exemptions