The ban on palm oil exports announced by Indonesia last week has come into effect from Thursday. However, later, the country, which is the world’s largest producer of palm oil, clarified that the export ban announced late last week will not be applicable to crude palm oil but will only cover refined, bleached, deodorised (RBD) palm olein. Here’s all what you need to know about the ban and the facts around it:
Why Did Indonesia Ban Palm Oil Exports?
Indonesia last week announced the ban on the export of palm oil with effect from April 28, in the wake of a severe shortage and skyrocketing prices of edible oil in the Southeast Asian nation. The country is the biggest palm oil producer in the world. The world cooking oil supply has been in a huge supply deficit due to the Russia-Ukraine war, driving prices of palm and soy oils to record highs. This export ban and increase in Malaysian taxes will further exacerbate the problem.
How Much Does India Import Palm Oil?
India is the largest importer of palm oil in the world and is dependent on Indonesia and Malaysia for its demand. India imports over 13.5 million tonnes of edible oil every year. Out of this, 8-8.5 million tonnes (around 63 per cent) is palm oil. Now, nearly 45 per cent comes from Indonesia and the remaining from neighbouring Malaysia. India imports roughly 4 million tonnes of palm oil from Indonesia each year.
Uses Of Palm Oil Across Industries
Palm oil and its derivatives are used in food products, detergents, cosmetics and biofuels. These are used to manufacture several daily consumption goods such as soaps, margarine, shampoos, noodles, biscuits and chocolates. So, any rise in palm oil prices will push up the input costs across these industries.
Parle Products Senior Category Head Mayank Shah has said, “That’s (challenges) not just for the food companies but for FMCG (fast-moving consumer goods) 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.”
Santosh Meena, head (research) at Swastika Investmart, said, “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.”
India’s Palm Oil Mission
Last year, the government launched the National Mission on Edible Oil-Oil Palm (NMEO-OP), with an investment of over Rs 11,000 crore over a period of five years. The Mission aims to harness domestic edible oil prices that are dictated by expensive palm oil imports and become self-reliant in edible oil, and to raise the domestic production of palm oil by three times to 1.1 million MT by 2025-26.
“The salient features of NMEO-Oil palm include assistance for planting material, inputs for intercropping up to gestation period of 4 years and for maintenance, establishment of seed gardens, nurseries, micro-irrigation, bore well/pumpset/water harvesting structure, vermi compost units, solar pumps, harvesting tools, custom hiring centre cum harvester Groups, farmers and officers training, and for replanting of old oil palm gardens etc,” according to an official statement.
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