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Indonesia took an important decision regarding palm oil, what will be the effect on India🥶

palm oil
palm oil

Indonesian President Joko Widodo has said that he will ban the export of palm oil and its raw material used for cooking from the 28th of this month.

He said that during this period the production of palm oil in the country will be continuously monitored. Consideration will be given to lifting the ban only after ensuring the supply of ‘cheap and plentiful’ palm oil in the country.

In a video message, President Joko Widodo said on Friday that he aims to ensure the availability of food items in the country. The ban on the export of palm oil will remain in force till the next decision.

Palm trees are cultivated on a large scale in Indonesia. Palm oil is produced from its fruit, from which cooking oil is made. Apart from this, it is used in detergents, shampoos, toothpaste, toiletries, donuts, and lipsticks. It is also used in biofuel in some parts of the world.

Indonesia is the world’s largest exporter in terms of palm oil production. But at present, the country itself is struggling with its shortage at the local level.

According to the stock market Nasdaq website, at the end of January this year, Indonesia limited the export of palm oil. The ban on this was lifted in March, but by then the prices of palm oil in the international market were skyrocketing.

According to a report published in Bloomberg, many countries are taking steps to save their crops to avoid the situation of food shortage given rising inflation since the start of the Russia-Ukraine war. This decision of Indonesia is also being seen as a step in this direction.

According to a news published on Channel News Asia this week, concerns have increased due to Indonesia’s decision. At the same time, the prices of soybean oil have also increased in the international market.

The report says that Ukraine is the world’s largest producer of sunflower oil and exports from here have been affected due to the Russia-Ukraine war.

76 percent of the world’s sunflower oil is traded through the Black Sea, but this trade has been badly disrupted by Russia’s attack on Ukraine. In such a situation, people’s hopes were on soybean and palm oil.

Soybean oil is seen as a good alternative to palm oil in terms of kitchen use.

But a few weeks ago Argentina, the world’s largest exporter of vegetable oil, announced the closure of registration for exports of soybean oil. With this move, it banned the export of the crop planted in the year 2021-22.

In March this year, the news agency Reuters published a report according to which Argentina imposes a 31 percent tax on soybean oil exports. Despite the drought this year i.e. 2021-22, soybean production in the country is between 40 million and 42 million tonnes.

After the decision of the government, suppliers and exporters in Argentina say that it is not in the interest of the country. They say that if its export is banned, it will harm the country’s economy and its need for foreign exchange will not be met. And oil importing countries can turn to America or Brazil in search of an alternative.

Amid rising inflation around the world, the United Nations has appealed to the countries to keep the prices of things under control at the international level, so that the effect of the country’s war on trade should not be allowed and trade should continue.

Several media reports have said that countries already facing supply chain problems due to the Kovid epidemic, apart from the Russo-Ukraine war, may see a big impact on the decisions of Argentina and then Indonesia. This may result in an increase in the prices of edible oils at the international level.

In January this year, Indonesia imposed restrictions on the sale of palm oil within the country. The government had made it mandatory to sell crude palm oil within the country in a certain quantity for a maximum of 9,300 Indonesian rupees per kg.

According to Nikkei Asia, the price of edible oil had started rising within the country and it registered an increase of up to 40 percent compared to last year. After this, the country’s Trade Minister Mohammad Lufti made it mandatory for all producers of edible oil to sell 20 percent of their exports in the market within the country.

What will be the effect on India

According to a report published in Business Standard, India imports 13 million tonnes of cooking oil every year, 63 percent of which is 8.5 lakh tonnes of palm oil. A large part of it is bought from Indonesia, while Malaysia and Thailand also sell palm oil to India in some quantity.

BL Agro is a company that imports palm oil from Indonesia and Malaysia into India. The company’s chairman Ghanshyam Khandelwal told the BBC, “The central government imports 65 percent of the total oil consumed in India, and 35 percent is produced in the country. 60 percent of the 65 percent of oil imported. There is palm oil because it is mixed with the rest of the oil.”

The central government spends Rs 50,000 crore annually on the import of palm oil.

BV Mehta, director general of Solvent Extractors Association of India, has told Business Standard that this move of Indonesia may affect other countries but it can affect India badly. He believes that India needs to activate its diplomatic avenues to deal with this crisis.

According to the report published in The Hindu Businessline, Indian consumers should gear up for the difficult times to come.

It has been said in this report that the Indian market is already facing inflation in the post-Covid era during the Ramzan and wedding season. In such a situation, after the move of Indonesia, the prices of edible oil there will come down, but its prices in India can touch the sky.

According to a report published in the Indian Express, traders in India can also see an increase in the price of edible oil by Rs 3,000 to 5,000 per tonne. Quoting an expert, it has been said in the report that its big impact can be seen only after the trade market opens on Monday.

courtesy of BBC

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