The country’s edible oil consumption relies on imports, which is about 70%, an increase from 40% 20 years ago

by SHAHEERA AZNAM SHAH / pic by BLOOMBERG

THE loss in export revenue of refined palm oil products to India could be pared down by the anticipated jump in the demand for crude palm oil (CPO).

India’s Ministry of Commerce and Industry on Wednesday revised the policy on imports of refined bleached deodorised (RBD) palm oil and RBD palm olein, which were changed from “free” to “restricted”.

An industry observer familiar with the matter said India now has to substitute the RBD palm oil and RBD palm olein, which is essentially cooking oil, with unrefined CPO to cater to the increasing food demand in the country.

India has about 800 refiners in its palm oil industry. New Delhi’s move comes after the refiners’ association asked the government to control the imports of refined palm oil products because they are losing out.

“It is no help that the imported RBD palm oil and RBD palm olein from Indonesia and Malaysia compared to the local production. With no import supply, industry players, particularly from the food and beverages industry, have to source RBD palm oil and RBD palm olein from their local refiners, which in turn, will increase the uptake of CPO feedstock from Malaysia and Indonesia,” the industry observer told The Malaysian Reserve.

He added that India’s demand for palm oil has not declined as the population in the country has grown. Early this month, the Indian government reduced the import taxes on crude and refined palm oil from the South-East Asian countries after its suppliers had requested for a discount.

According to a notice by the Indian government, the duty on CPO was lowered to 37.5% from 40%, while duties on the refined products were cut to 45% from 50%.

Palm oil accounts for about 70% of India’s edible oil imports — which is around 15 million tonnes annually — an increase from 40% 20 years ago.

Malaysia’s palm oil and palm oil-based products export to India between January and November last year stood at 4.27 million tonnes, almost double the volume export in 2018 at 2.22 million tonnes.

In comparison, Indonesia’s total palm oil exports to India in the half of 2019 stood at 2.13 million tonnes, well over a third of its entire 2018 export volume of 5.92 million tonnes.

Palm oil exports are vital to the Malaysian economy as it accounts for 2.8% of the country’s GDP and 4.5% of total exports.

In the first 11 months last year, Malaysia exported 25.67 million tonnes of palm oil and palm-oil based products worth RM58.31 billion.

For CPO, Malaysia exported about 3.55 million tonnes of the crude product in the same period last year worth RM7.32 billion.