Indonesian palm oil ban: Industry suggests govt to initiate dialogue

Boiling Oil prices

• There will be an immediate impact on prices in Indian market as the news of the ban has distorted the sentiment

• The WPI-based inflation already surged to 14.55% in March 2022, after a 13.11% reading in February 2022.

• Edible oils such as palm oil are a key raw material for FMCG and HoReCa (hotels, restaurants and caterers) industries

• And a rise in the prices of these commodities will impact consumer goods beyond food products such as soaps, shampoos

Kolkata: The cooking oil national industry body - Solvent Extractors' Association (SEA) of India has suggested immediate initiation of government to government (G2G) dialogue with Indonesia on the proposed palm oil export ban from April 28 by them as it would have an adverse repercussions in India.

Indonesia, which is the world's largest producer of palm oil and meets nearly 50 per cent of the total palm oil requirement in India annually, had announced to ban exports till further notice apparently to contain edible oil prices in their domestic market. "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 B V Mehta said.

SEA liaisons with the Union Food ministry, he said. Mehta said, "... 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 cooking oil industry was prepared for a tweak in export duty at worst by Indonesia which is grappling with its cooking oil price spike in their domestic market by about 40-50 per cent. Indonesia was levying $575 per tonne export duty. "The news will push Malaysia oil prices higher which is our major alternate sourcing market," Mehta said.

"India consumes 22.5 million tonne of edible oil annually of which 9-9.5 million tonne is met by domestic supplies and the rest by imports. About 3.5-4 million tonne of palm oil is imported by India annually from Indonesia," he said. With the Ukraine war, the sunflower and soybean oil is 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 said. The last Indian Economic Survey had blamed rising price of oil and fats and it was 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 beverages 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 had begun in Q4FY19-20 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 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.