Palm Oil
Between 2016 and 2019, India has imported 27.71 million tonnes of crude and refined palm oil | Photo: iStock

Indonesian palm oil export ban begins: Here's how it will impact India

Edible oils such as palm oil are a key raw material for the FMCG and food industries; a rise in their prices can increase prices across the board

  • Whatsapp
  • Telegram
  • Whatsapp
  • Telegram
  • Whatsapp
  • Telegram

Indonesia, the world’s largest producer of palm oil, has announced a ban on exports to contain edible oil prices in their domestic market. The ban, which came into effect on Thursday (April 27), also includes crude palm oil, which was earlier exempted.

India’s nearly 50% of total palm oil requirement annually is fulfilled by Indonesia. Malaysia and Indonesia are the major suppliers of palm oil to India. In 2020-21, India imported 133.5 lakh tonnes of edible oil, out of which the share of palm oil was around 56%.

The export ban has trapped at least 290,000 tonnes of the edible oil meant to be headed to India at ports and oil mills in Indonesia, a Reuters report said on Thursday, quoting industry officials. “Our vessel of 16,000 tonnes is stuck at Kumai port in Indonesia,” the report quoted Pradeep Chowdhry, managing director of Gemini Edibles & Fats India Pvt Ltd, which buys around 30,000 tonnes of Indonesian palm oil every month, as saying.

Due to the ongoing Russia-Ukraine war, sunflower and soybean oil are already under pressure as imports have halved but the situation was managed with other variants of oils. But the Indonesian oil ban will have a “devastating effect” unless sorted out quickly, an edible oil refiner official told PTI.

‘Serious repercussions’

Last month, India’s palm oil imports jumped 18.7% from the previous month. In March, India imported 539,793 tonnes of palm oil, up from 454,794 tonnes in February, said the national edible oil industry body, Solvent Extractors’ Association of India (SEA).

SEA has urged the Centre to have talks with Indonesia at the highest diplomatic level to lift the export ban. “We have suggested our government initiate dialogue with Indonesian counterparts at the highest diplomatic level on the cooking oil export ban. This will have serious repercussions in our domestic market as half of our total imports of palm oil is from Indonesia and no one can fill up this void,” SEA director general BV Mehta told PTI.

“… the industry was not expecting a ban. There will be an immediate impact on prices in the domestic market from Monday itself as the news of the ban has distorted the sentiment… the news will push Malaysia oil prices higher which is our major alternate sourcing market,” he added.

According to Mehta, India consumes 22.5 million tonnes of edible oil annually, of which 9-9.5 million tonnes are met by domestic supplies and the rest by imports. About 3.5-4 million tonnes of palm oil is imported by India annually from Indonesia.

Impact across industries

Edible oils such as palm oil are a key raw material for FMCG (fast-moving consumer goods) and HoReCa (hotels, restaurants, and caterers) industries and a rise in the prices of these commodities impacts consumer goods beyond food products such as soaps, shampoos, etc.

Parle Products Senior Category Head Mayank Shah was quoted as saying by News18, “That’s (challenging) not just for the food companies but for FMCG companies at large because there are many other players beyond food firms, including those who manufacture soaps and other things. So, it’s going to be very challenging.”

“Palm oil and its derivatives are used in producing several goods for daily consumption such as soaps, shampoos, biscuits, and noodles. This will negatively affect FMCG companies like HUL, Nestle, Britannia, Godrej Consumer Products Ltd, Marico Ltd., etc. The high prices will leave packaged food products manufacturers, soap manufacturers, and other personal care manufacturers with no other option than to raise prices and thus affecting their volumes,” Santosh Meena, head (research) at Swastika Investmart, said, according to News18.

Amonng solutions, the NMEO-OP

In November 2021, the government launched the National Mission on Edible Oils – Oil Palm (NMEO-OP) with an aim to augment the availability of edible oil in the country by harnessing area expansion, increasing crude palm oil production with the aim to reduce the import burden.

“The salient features of NMEO-Oil palm include assistance for planting material, inputs for intercropping upto gestation period of 4 years and for maintenance, the establishment of seed gardens, nurseries, micro-irrigation, bore well/pumpset/water harvesting structure, vermicompost units, solar pumps, harvesting tools, custom hiring centre cum harvester Groups, farmers and officers training, and for replanting of old oil palm gardens etc,” the Ministry of Agriculture & Farmers Welfare said.

The total approved cost of the NMEO (Oil Palm) Scheme is ₹11,040 crore, out of which ₹8,844 crore is the central share and ₹ 2196 crore state share. For the year 2021-22, a total of Rs 10422.69 lakh has been approved for various state annual action plans.

The Reassessment Committee of ICAR-Indian Institute of Oil Palm Research (IIOPR) 2020 has assessed around 28 lakh hectares of potential for oil palm cultivation. While assessing the potential area, ICAR-IIOPR considered all the environmental and biodiversity parameters and recommended its cultivation in selected districts and states, the ministry said.

Read More
Next Story