Indonesia’s decision last Friday to ban the export of palm oil and its derivatives had alarmed the Indian industry, with many expecting a fallout on the largest consumed vegetable fat. However, the prices corrected themselves by Monday after it appeared that the ban extends mostly to palmolein, with crude palm oil (CPO) and refined palm oil (RPO) being exempted from the ban. A favourable fallout, some say, would be increased area under oilseeds in India during the upcoming Kharif season.
On Friday, the edible oil industry in India and the world was shaken by news of a complete ban on export of palm oil and its derivatives by Indonesia – the world’s largest palm oil manufacturer. This was in response to increased cost of the most commonly used cooking medium there which had seen the government coming under increased pressure. Earlier, the Indonesian government had mandated selling of 30% of export quota domestically at concessional price to ensure domestic prices remain under control there during the fasting month of Ramzan.
India, on an average imports 60% of the 20-21 million tonnes of edible oil it consumes annually. Nearly 14-15 million tonnes of edible oil is shipped into the country of which more than 60% is palm oil, sourced from Indonesia. Palm oil finds use in biscuits, namkeens and other commercial savouries.
Thus Indonesia’s decision to ban exports had seen the commodity appreciate 6% in price on Monday morning at Bursa derivatives market of Malaysia. With palm oil trading around Rs 150/litre in retail market, fear was expressed of further price rise in India with the latest round of restrictions. Earlier, Indonesia had mandated that 30% of the export quota has to be sold domestically at concessional price.
However, the price rise soon corrected as there was more clarity about the export ban came in. Atul Chaturvedi, president of Solvent and Extractors Association (SEA), the apex body of edible oil manufacturers, said the ban was mostly about palmolein while CPO and RPO were exempted from this.
“While prices had seen an appreciation, they soon corrected on the Bursa Index,” he pointed out. The main reason for Indonesia clamping down on exports is the diversion of palm oil for blending in fuel for bio diesel. “If India has imported inflation, Indonesia has exported inflation – the higher demand for palm oil for blending due to rising price of fuel in the international markets,” he said.
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