Indonesia has decided to ban exports of cooking oil and its raw materials to reduce domestic shortages and hold down skyrocketing prices. President Joko Widodo made the announcement amid protests in the country’s capital against rising food costs.
The ban will come into force on Thursday (April 28) and is set to continue for an undetermined length of time, the President said. “I will continue to monitor and evaluate the implementation of this policy so that the availability of cooking oil in the country is abundant and at an affordable price,” Widodo said in a statement.
LARGEST PALM OIL EXPORTERS
Indonesia and Malaysia are the world’s largest exporters of palm oil, which plays an important role in their economies. They account for 85 per cent of global palm oil production, according to an Associated Press (AP) report.
WORRY FOR INDIA
Indonesia is not only the world’s largest producer of palm oil but also meets nearly 50 per cent of the total palm oil requirement in India annually.
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.
PRICES TO GO UP?
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 adverse repercussions in India.
“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 was quoted as saying by PTI.
“The news will push Malaysia oil prices higher which is our major alternate sourcing market,” Mehta said.
“India consumes 22.5 million tonnes 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 tonnes of palm oil is imported by India annually from Indonesia,” he said.
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, PTI reported.
With the Ukraine war, 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, PTI reported.
The last Indian Economic Survey blamed rising price of oil and fats and it was a major driver of inflation in the foods and beverages category in the fiscal 22, as per PTI report.
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, as per a PTI report.