Edible oil prices have been on the rise due to disruptions in sunflower oil since the outbreak of the Ukraine-Russia crisis. Now, Indonesia, India’s main source of palm oil imports, has banned exports of all edible oil raw materials from 28 April to ease what are being called ‘domestic shortage’. The problem for Indonesia, however, appears to be inability of local producers, most of them small and scattered, to match the rising demand. Indonesia had restricted palm oil exports in January but that was lifted in March. Indonesia, along with Malaysia, the world's No. 2 palm oil exporter, is also facing a production shortfall due to a pandemic-induced labour shortage, sweeping policies are also responsible. Indonesia has since 2018 stopped the issuance of new permits for palm oil plantations, often blamed for deforestation and destroying habitats of endangered animals, such as orangutans. For India, the current situation has also highlighted the need for self-sufficiency or at the least to reduce import dependence. The self-sufficiency in oilseeds attained through the ‘Yellow Revolution’ during the early 1990s, could not be sustained beyond a short period. Several steps to boost oilseed production have been taken since then. One of them is the recently-launched Oil Palm Mission with the objective of producing 2.8 million tonnes of palm oil locally by 2025-30. However, even if the mission succeeds, it will not significantly lower import dependency. Despite all the measures, India’s reliance on imported edible oils continues to grow. Reeling under inflation India sources about half of its total requirement of 8.3 million tonnes of palm oil from Indonesia. Data from rating agency Icra shows that palm oil accounts for about 40 per cent of total edible oil consumption in India. It is this sizeable percentage of palm oil in our edible oils basket that created panic. The palm oil imports include crude palm oil (CPO), Palmolein and PFAD (Palm Fatty Acid Distillate). The Indian edible oil market is already reeling under inflation amidst post-Covid consumption push coupled with the Ramadan period and marriage season. Malaysia is the second largest source of palm oil (3.8 million tonnes), with Thailand accounting for the remaining half-a-million. In all, India imports 13.5 million tonnes of edible oil. CPO prices are already up by 15 per cent since February 2022. This has had an effect on non-palm oils, such as crude sunflower oil, which has increased by 41 per cent in the past one month. Palm oil is a key raw material for FMCG as well as hotel industry. It is preferred in India’s foodservice industry as it is relatively cheaper, lasts longer and is more stable at high temperatures than other oils. Palm and its derivatives account for over 20 per cent of the input cost basket of the consumer companies, which means any escalation in prices will squeeze their margins further, which will inevitably lead to another round of price hike in products such as soaps and shampoos, apart from food products.
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Palm oil accounts for about 40 per cent of total edible oil consumption in India
