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The government’s recent move to cut import duties on key edible oils, including palm, soybean, and sunflower oil, is expected to offer significant relief to Fast-Moving Consumer Goods (FMCG) companies.

Industry experts believe this reduction, effective from May 31, 2025, will help manufacturers control their raw material expenses and improve profit margins, especially for products dependent on palm oil, reported PTI.

Palm oil, widely used in the production of both food and personal care products like soaps, makes up a substantial portion—about 25–30 per cent—of the raw material costs for food processing companies. The revised duty structure is anticipated to ease cost pressures and moderate consumer price inflation. Additionally, the price of Palm Fatty Acid Distillate (PFAD), a byproduct essential for soap manufacturing, is also expected to decline as a result of this policy.

No Immediate Price Cuts for Consumers, But Stability Expected

Despite the anticipated cost savings, Parle Products Vice President Mayank Shah clarified that the reduction in duties may not immediately translate into lower prices for end consumers. “This reduction would not have any impact on consumer prices but would help in maintaining prices,” Shah told PTI.

FMCG firms had already increased product prices in the March quarter to counter rising palm oil rates. However, Shah noted that the hikes were measured to avoid losing market share. “When the last price hike was done, it was not enough to mitigate the entire increase in input cost. It was done to only partly take care of the increase in input cost, and companies took a bite on their bottom line,” he added.

With import duties now lowered, Shah expects price hikes to pause in the near term. “Now, with the reduction, the best scenario that we expect is that there won't be any price hike that would happen and going forward, I think, it would also keep inflation in check,” he said.

Positive Signals for FMCG Giants

Godrej Consumer Products Ltd (GCPL), which markets soap brands such as Godrej No. 1 and Cinthol,  welcomed the government's decision. “The government’s decision to reduce import duty on palm oil is a positive step. This move, along with the early signs of global palm oil price softening, will help stabilise input costs,” said Krishna Khatwani, Head of Sales (India) at GCPL.

The company also emphasised that this development enables a more balanced strategy in managing both volumes and margins.

A report by Nuvama Institutional Equities echoed this sentiment, highlighting that the 10 per cent reduction in import duties is likely to curb monthly consumer inflation while easing input cost pressures for food and personal care companies. Firms such as Britannia, Nestle, ITC, and Bikaji Foods are identified as key beneficiaries. Non-food FMCG players like HUL and GCPL stand to gain particularly if the prices of palm oil derivatives such as PFAD begin to decline.

The Nuvama report further noted that during the March quarter, FMCG companies faced gross margin pressure from the inflated prices of palm oil, coffee, tea, and copra. The latest policy move is thus expected to provide a cushion against such input cost volatility in the months ahead.