Notwithstanding the advancement of a country’s economy, insistence for quasi-protectionist policies intermittently comes to the fore. A frequent action is the imposition of tariffs: a tax or import duty levied by a national government on an imported product. Major economies like India, the United States, China, Russia, United Kingdom and the European Union (EU) take recourse to such actions at various points in time. In India’s economy, at present, the producers of edible oils are keen for a tariff on international brands. By their reckoning, an import tariff — tax placed on an imported product — by India would provide necessary adherence to domestic products.

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In India, prices of indigenous edible oil are plummeting, leaving local  producers apprehensive. The government is being urged to increase import tariffs of crude palm oil to 20 per cent from 7.5 per cent and to 12.5 per cent for other soft oils. Furthermore, there is demand for hiking import duty on palm oil to 35 per cent from 15 per cent. On other refined oils, a hike of 20 per cent has been proposed.       

The argument forwarded in favour of a notable rise in import duty calls for earnest contemplation. Production of various edible oilseeds has increased. Nevertheless, prevailing market prices have not been to the satisfaction of producers. In certain cases, prices have registered 20 to 30 per cent decline from the previous year. The viewpoint forwarded by states is that imposing import duty on refined oils would bolster the domestic refining industry; it would also be in tune with the ‘Make in India’ initiative of the government.       

The edible oil industry should keenly observe the aftermath of tariffs for the country’s steel industry. The government introduced a minimum import duty on certain imported steel products for about a year in February 2016; in the following months, it introduced duties on some steel products, imported from China and the EU. It has further extended that duty on steel imports this year from China for the next five years.     

The central cabinet has just cleared a policy to treble India’s steel production than now, by 2030. But, sceptics are wary of the attainability of that goal by the stipulated time. The influx of relatively cheaply-priced imported steel continues from China, EU, Japan and South Korea. The tariffs have not been as expedient as desired.   

Tariffs are levied for potential welfare effects for the nation’s economy. There are two broad categories of national estimation regarding tariff welfare: ‘Small Nation Economy’ and ‘Large Nation Economy’. The former is a price bearer, facing a constant international price for any imported commodity. The latter is large enough to affect the international price of a particular commodity through alterations in its import quantity through tariffs. The Indian economy appears to be an amalgamation of both designations in certain aspects, with an apparent tilt toward the ‘Large Nation Economy’ epithet.      

If the Indian government imposes a tariff on any imported product, the burden will fall on Indian consumers. They would face a higher price for that commodity. The after-tariff increased market price will reduce demand for that commodity. It will put consumers at a relative disadvantage. Indian producers will have a relative advantage, temporarily, at a higher market price. Nevertheless, if continued, it would ultimately harm the domestic consumer and lead to wastage of resources.           

However, other countries could also impose consequent tariffs on Indian products. Furthermore, they could reduce the export price of their commodities through greater productive efficacy, diluting the effect of Indian tariffs on their products. India is not an unquestioned ‘Large Nation Economy’ to solely influence the international price of a particular commodity through tariffs.      

The edible oils sector of the Indian economy, as also other sectors, need to concentrate on efficacy, quality, and specialisations than insisting for blanket tariffs. If imposed, tariffs should be temporary. Its relevance alters with time and cannot be subjected to prolonged continuation.      

The author is an analyst, writing on international economics and world politics