MUMBAI - Palm oil prices in India have risen more than 6% even after the government cut import tax and allowed shipments of refined palm oil as its price overseas jumped in anticipation of strong demand from the world's biggest buyer, industry officials said.

Higher palm oil prices could weigh on Indian demand and may prompt the government to refrain from cutting import taxes further as the price rise highlighted the limitation of duty reduction.

Malaysian palm oil futures, which were correcting after hitting multi-year highs, have risen 9% since India cut its import tax on crude palm oil (CPO) by 5% for three months on June 29. India also allowed imports of refined palm oil on June 30.

"As soon as India cut the duty, international suppliers raised prices," said B.V. Mehta, executive director of the Solvent Extractors' Association of India (SEA), a trade body of Indian vegetable oil refiners and traders.

"Every time India reduces duty, the international market goes up. Part of the duty cut benefit gets absorbed by suppliers and Indian consumers get the remainder. But this time, Indian consumers didn't get any benefit."

Landed cost of crude palm oil in India have risen to $1,085 per tonne from $1,020 per tonne on June 29, according to data compiled by the SEA.

During the period, prices of refined palm oil went up to $1,055 per tonne from $1,020 per tonne.

India cut import tax on CPO as domestic prices nearly doubled in the past year, hitting consumers already stung by record fuel prices and reduced incomes amid the COVID-19 pandemic.

Indian buyers aggressively started purchases after the government allowed the refined palm oil imports and cut import tax, supporting Malaysian palm oil futures, said a Mumbai-based dealer with a global trading firm. 0FK

"India is likely to restore the old duty structure after September since local prices are firm despite lower duty," the dealer said.

(Reporting by Rajendra Jadhav Editing by Robert Birsel) ((rajendra.jadhav@thomsonreuters.com; +91-22-68414378 ; Reuters Messaging: rajendra.jadhav.thomsonreuters.com@reuters.net))