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The impact of Indonesia’s ban on palm oil exports may be felt in India’s edible oils prices

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The already high prices of edible oil after the Ukraine-Russia conflict will be fuelled further by the announcement that Indonesia, world’s largest palm oil producer and supplier, has banned its exports starting April 28.

India imports approximately 80 lakh tonnes of palm oils from Indonesia, Malaysia, and Thailand each year. According to Solvent Exporters’ Association (SEA), almost three million tonnes of palm oil are imported from Indonesia each month, which amounts to six lakh tonnes.

Even though the ban on exports will only be in effect for five days, it has created buzz in India with traders concerned about the impending shortage and price hike. “This (decision), is fuel for the fire. Due to the Ukraine-Russia conflict, we were already in a very worrying position. Now it is worse. B.V. Mehta, Solvent Extractors Association (SEA) executive director, said that the gap is too large to close.

Mehta stated that Indonesia had half a million tonnes of storage, with four lakh tonnes arriving in each month. They will soon open their doors, I’m sure.

Echoed Suresh Nagpal, chairperson of the Central Organisation for Oil Industry & Trade (COOIT): “Indonesia supplies almost 60-70 percent of the world’s palm oil. This panic decision is made by the government because there is disruption to their supply chain. They will reverse their decision in approximately 10-15 days, I am certain.”

Even though there has been no trade on the commodities market over the weekend, palm oil prices have seen an increase of Rs 3000 to 5k.

The real impact of the market opening Monday morning will be evident. Mehta stated that India has also been requested to start G-to-G negotiations with Indonesia.

It wasn’t immediately clear what steps the government had in mind. Telephone calls and SMS to Sudhanshu Pandey (Food Secretary) went unanswered.

The government had already reduced the agriccess for Crude Palm Oil from 7.5 to 5 percent in order to stop edible prices rising. This was done just days before the Russia/Ukraine war broke out.

After reducing the agriĀ­cess, import tax gaps between CPO/Refined Palm Oil have increased to 8.25 percent. Domestic refining industries will be able to import Crude Oil for refinement due to the increase in the gap between CPO and Refined palm Oil.

Pre-emptive measures included the extension of the current base rate of import duty at zero percent for Crude Palm Oil, Crude Soybean Oil and Crude Sunflower Oil until September 30, 2022.

In order to stop hoarding and black market edible oils, the government also established a stock limit for February. It was extended in March, June, and September.

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