India’s imports for refined palm oil fell to half in October and November 2019 thanks to a government policy aimed to support the domestic oil industry.
India’s imports for refined palm oil fell to half in October and November 2019 thanks to a government policy aimed to support domestic oil industry. With India’s heavy reliance on import to fulfil its domestic edible oil demand, the government decided to hike the import duty on refined palm oil sourced from Malaysia by 5% to 50% for a period of 180 days. Rolled out in September, the policy had a tremendous effect on palm oil imports which fell from the levels of 2.57 lakh tonnes in August 2019 and 2.64 lakh tonnes in September 2019 to 1.19 lakh tonnes in October 2019 and 1.22 lakh tonnes in November 2019, according to a CARE Ratings report. Imports from Malaysia alone fell by 32.7% in October 2019 on a monthly basis.
The move aimed to support the Indian edible oils industry. India is the single largest importer of the total palm oil produced in Malaysia and the consumption of edible oil in the country has been on an upward trend. “Of the total palm oil exports made by Malaysia, India accounted for a share of 14.6% during January-November 2018 which increased to a share of 25.1%, that is a quarter of total exports during January-November 2019 as the exports to India surged by a sharp 91.5% to 4.3 million tonnes from 2.2 million tonnes earlier,” the report said.
Outlook for prices
Going ahead, the prices for palm oil are expected to see a rise owing to unfavourable weather conditions in Indonesia and Malaysia, which are the two biggest palm oil producers in the world. The unstable weather conditions are expected to impact production by next year. “It is expected that the international palm oil prices will remain firm and may rise on a sequential basis in the coming months. This, in turn, will keep the domestic palm oil prices elevated as well,” the report said. Further, the prices are also expected to rise because of diversion of palm oil to be blended with diesel fuel.