India, the largest cooking oil consumer after China, will probably increase taxes on imports to shield oilseed farmers from cheap palm supplies from Indonesia and Malaysia, according to a trade group.

The government may raise the tariff on unprocessed oils to 10 per cent from 2.5 per cent in the federal budget next week, while the tax on refined varieties could increase to 20 per cent from 7.5 per cent, B.V. Mehta, executive director of the Solvent Extractors' Association of India, said in a phone interview.

India will present its annual budget on February 28 and Finance Minister Palaniappan Chidambaram is seeking to raise revenue, partly by increasing taxes on commodities. Tariffs on gold imports may rise for a second time this year to curb a record current-account deficit, according to the All India Gem and
Jewellery Trade Federation. Imports of palm and soybean oils surged to a record last month as refiners boosted purchases before the government imposed a tax on January 17.

"If the government increases duties there may be a temporary setback to imports and palm product prices may drop in Indonesia and Malaysia," said Prasoon Mathur, an analyst with Religare Commodities Ltd.

"Even if local supplies are comfortable, India will still keep importing palm products as there is a price advantage."

D.S. Malik, spokesman at the Finance Ministry in New Delhi, declined to comment on possible tax changes yesterday.-- Bloomberg