Accepting the recommendation of the Tariff Commission, the government on Thursday hiked customs duty on refined palm oils by five per cent to 75 per cent to make oilseeds cultivation and domestic refining of crude oils economically more viable.

Accepting the recommendation of the Commission, the import duty on refined palm oils will be increased to 75 per cent from 70 per cent while retaining the duty on crude palm oil (CPO) at 65 per cent, Finance Minister P Chidambaram told Parliament as part of his Budget proposals.

Officials said the hike in duty has large international repercussions as India is the world's largest importer sourcing nearly half of its requirement from abroad.

They said the differential between import duties on CPO and refined palm oils will be 10 per cent leading to larger imports of CPO vis-a-vis RBD palmolein and RBD palm oils.

The issue had been referred to the Tariff Commission in Department of Revenue after the Directorate of Vanaspati had favoured a higher duty differential between crude and refined palm oils last year.

The hike in import duty today is the culmination of a long drawn out process as the TC recommendation was first approved by the Food Ministry and then referred to the High Powered Price Monitoring Board in Cabinet Secretariat.

Earlier, the TC had done a cost benefit analysis, trying to figure out the cost of refining imported CPO and margins earned thereof. It had then compared these costs with the actual price at which RBD palm and palmolein oils were available.