The Solvent Extractors’ Association (SEA) of India has requested the Indian government to immediately initiate dialogue with Indonesia on the proposed palm oil export ban from April 28 as it would have adverse repercussions on India.
Indonesia, the world’s largest producer of palm oil and meets nearly half of India’s total palm oil requirements annually, has announced a ban on exports until further notice, ostensibly to keep edible oil prices stable in their domestic market.
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 sentiment. The cooking oil industry was prepared for a tweak in export duty at worst by Indonesia, which is grappling with its own cooking oil price spike in its domestic market by about 40-50 per cent.
Indonesia was levying an export duty of USD 575 per tonne. The news will push Malaysian oil prices higher, which is our major alternate sourcing market, “SEA director general B V Mehta said.
“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 are imported by India annually from Indonesia, “he said.
With the Ukraine war, sunflower and soybean oil are already under pressure as imports have halved, but the situation was managed with other variants of oil. But the Indonesian oil ban will have a “devastating effect” unless sorted out quickly, an edible oil refinery official said.
The last Indian Economic Survey blamed the rising price of oil and fats for being a major driver of inflation in the foods and beverages category in the fiscal FY’22.
Oil and fats contributed to around 60 per cent of food and beverage inflation in the country, despite having a weight of only 7.8 per cent in the basket. Inflation both at the retail and wholesale levels for edible oil began in Q4 FY19-20 and still continues.
The Wholesale Price Index or WPI -based inflation already surged to 14.55 per cent in March 2022, after a 13.11 per cent reading in February 2022. Edible oils such as palm oil are a key raw material for the FMCG 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.