India is considering an increase in import taxes on vegetable oils to help protect farmers reeling from lower oilseed prices, two government sources said on Wednesday.

The move, which is likely to be announced in the coming weeks, could dampen demand and reduce overseas purchases of palm oil , soyoil and sunflower oil.

"We are exploring all options to help farmers. Increasing import taxes is one of the options," said a government source, who asked not to be named in line with official rules.

A proposal has been made by the farm ministry and a final decision will be made by the Department of Revenue, which falls under the finance ministry, said another government official, who also declined to be named.

A government spokesman did not immediately respond to a request for comment.

In 2022, India, the world's biggest vegetable oil importer, abolished basic import taxes on crude vegetable oils to cool prices. New Delhi still levies a 5.5% tax, known as the Agriculture Infrastructure and Development Cess.

Farmers say higher import tariffs will help arrest a sharp drop in oilseed prices.

Domestic soybean prices are around 4,200 rupees ($50) per 100 kg, lower than the state-fixed support price of 4,892 rupees.

Farmers in Maharashtra, India's No.2 soybean-growing state, have been unhappy over the fall in prices.

"At the current price, we are not even covering our production costs, let alone earning a profit," said Maces Gaikwad, a farmer who grows soybean on a 4-acre (1.62 hectares) plot.

Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) is expected to woo farmers, who form an influential voting bloc, ahead of regional elections due in Maharashtra later this year.

The new soybean crop will arrive in six weeks, leading to a further drop in prices, said B.V. Mehta, executive director of the Solvent Extractors' Association of India.

In July, India's vegetable oil imports jumped 22.2% to 1.9 million metric tons, the second highest on record.

India meets more than 70% of its vegetable oil demand through imports. It buys palm oil mainly from Indonesia, Malaysia and Thailand, while it imports soyoil and sunflower oil from Argentina, Brazil, Russia and Ukraine.

($1 = 83.9290 Indian rupees)

Source: Reuters