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In a surprising move, Indonesia has banned all its exports of palm oil from April 28th. According to media reports, this action was taken to check the soaring prices of palm oil domestically, which have soared about 40% since the beginning of the year.
Indonesia is the top producer of palm oil as it produces around half the world's supply. It is also the largest consumer of the commodity. According to some estimates, Indonesia had produced around 46.2 million metric tonnes of oil in 2021. Some figures suggest that the country exports about 2/3rds of its palm oil production. Malaysia ranks second on the list as it produces around 25% of the existing production.
Palm oil is an essential product for several commodities like Shampoo, soaps, cooking oil, chocolates, detergents, and even lipstick! It is also valuable as a lubricant in industrial production and also in biodiesel.
Some figures suggest that India has an annual consumption of over 9 million metric tonnes and most of it is imported as India is the world's largest importer of palm oil. India imports a lot of vegetable oils of which 60% accounts for palm oil. Our country reduced taxes on crude palm oil imports in February 2022 to assist domestic refiners and consumers control rising prices.
The ban could not come at a worse time as vegetable oil prices have been surging for some time now. The ban could result in an immediate 10% jump in prices.
Ever since the Russia-Ukraine war, Indian imports of sun oil dropped drastically. To add to the injury, Canada and Europe, the largest producers of canola oil, reported crop damage. So India was dependent on palm oil imports. With this ban, India could spiral into a vegetable oil crisis.
India recently hit an inflation rate of 6.95% in March 2022, higher than 6% for the third consecutive month. Indians had hoped this was the highest they would have to see, but this ban might push retail inflation well into 7%.
Article by Aman Agarwal.
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