Curbs on Palm oil from Malaysia may impact India’s food inflation
This is a classic case of a non-tariff barrier to free trade, which follows India’s deep resentment of what it sees as “undue interference” by a foreign country in its internal political matters.Updated: Jan 10, 2020 12:05 IST
India, the world’s biggest importer of edible oils, has curbed inbound shipments of palmolein or palm oil, whose main exporter is Malaysia, a move that can alter global trade in these items and stoke inflation.
India’s move is the fallout of Malaysian Prime Minister Mahathir Mohamad’s comments, first at the United Nations, that India had “occupied” Jammu and Kashmir, and then on the Citizenship Amendment Act, both of which the Indian government has strongly reacted to.
The directorate general of foreign trade (DGFT), the country’s foreign trade regulator, had issued a notification on January 8, amending the foreign trade policy and putting three categories of refined palm oil from “free” to “restricted”.
This means that while there is no ban on imports, importers have to apply for licences for importing palm oil, which will be first vetted by DGFT.
This is a classic case of a non-tariff barrier to free trade, which follows India’s deep resentment of what it sees as “undue interference” by a foreign country in its internal political matters.
Indian importers will now naturally look at substitute markets, such as Indonesia, Nepal, Ukraine and Argentina, an official said.
Nepal, however, has expressed concerns because it is a major refiner of Malaysian palm oil, which it then exports to India.
India has to rely on imports to fulfil its domestic demand for edible oil, used as a cooking medium in households, and palm oil makes up nearly two-thirds of its total edible oil imports.
The country’s total import of crude edible oils was 12.4 million tonnes in 2018-19 valued at Rs 8227 million dollars, according to official figures.
India imports more than 9 million tonnes of palm oil every year, mainly from Indonesia and Malaysia, the two biggest exporters.
The import of crude edible oil in fact had negative growth of 14.17% in 2018-19 over 2017-18 and negative growth of 18.82% in 2019-20 (April to September) as compared to the corresponding period of the previous year, the data show.
In 2016-17, crude palm oil import from Malaysia stood at 1.9 million tonnes, while in 2017-18, inbound shipments were 1.7 million tonnes. A similar quantity was imported in 2018-19. Until September 2019, however, India was the biggest buyer of palm oil from Malaysia at 3.9 million tonnes.
Indian authorities and traders are looking for quick substitutes, without which prices of edible oils can see an upswing.
“Indonesia is ready to sell us and fill the gap of palm oil. If Indonesia can ramp up its exports, then there will be no problem. Otherwise, prices could go up,” said Mayur Raheja, an Indore-based trader.
India has a large number of alternatives, from soya to safflower and rapeseed, and countries, such as Ukraine, Brazil and Nepal to go to.
The country’s import of soya bean oil is likely to go up because of both the curb on Malaysian palm oil and lower output of domestic soya.
India’s soybean oil imports may go up to 3.4 million tonnes compared to the previous year’s 3.1 million tonnes, said Avinash Goel, an analyst with Comtrade.