Edible oil prices in India could zoom further as Indonesia announces a ban on palm oil export.
Inda imports 8-8.5 million tons of palm oil every year—that’s about 63 percent of the 13-13.5 million tons of edible oil it buys from outside. And nearly 45 percent of the palm oil comes from Indonesia alone, the remaining from Malaysia.
Ban to impact every country, including India
Sunflower oil supplies have already taken a hit following the Russia-Ukraine war. India was importing 200,000-250,000 tons of sunflower oil a month. It has now dropped to 100,000 tons. The domestic market is already facing an increase in cooking oil prices. “If Indonesia decides to suspend exports, it will cause serious trouble for us,” says B V Mehta, director general of Solvent Extractors’ Association of India (SEA).
Palm oil contributes to 34% of global edible oil consumption. Of the 80 million tons of palm oil the world consumes, 50 million tons come from Indonesia. “The ban will impact not only us but also every other country dependent on Indonesia for palm oil,” adds Mehta.
Indonesia’s domestic crisis
The Indonesian government has decided to suspend palm oil exports from April 28 until further notice because of unrest and student demonstrations in several cities due to soaring domestic prices. On Friday, President Joko Widodo said to Reuters that he is halting cooking oil shipments and its raw materials to check soaring prices in the domestic market.
“I will monitor and evaluate this policy’s implementation so the availability of cooking oil in the domestic market becomes abundant and affordable,” President Widodo has said in a video broadcast.
Production shortage is also due to the Indonesian government’s decision in 2018 to stop giving new permits for palm oil plantations, as they could further deforestation and habitat loss of endangered animals like orangutans.
Mehta says that to ward off this catastrophe (export ban of palm oil), India should activate its diplomatic channels with Indonesia immediately.
Reference: Business Standard