Context
The world’s largest producer and exporter of palm oil, Indonesia, is facing domestic shortages, leading to price controls and export curbs.
Relevance
GS-II: Effect of Policies and Politics of Developed and Developing Countries on India’s interests, Indian Diaspora.
Dimensions of the Article
- What is the Issue?
- What is Palm Oil?
- Plausible Factors
- Impact on India
What is the issue?
- It’s rare for any country that is the largest producer and exporter of a product to experience domestic shortages of the same product.
- Consumers are unable to access or paying through the nose for a commodity in which their country is the preeminent producer and exporter.
What is Oil Palm?
- Palm oil is an edible vegetable oil derived from the mesocarp of the fruit of the oil palms.
- The oil is used in food manufacturing, in beauty products, and as biofuel.
- Its palm oil production for 2021-22 (October-September) at 45.5 million tonnes (mt).
- That’s almost 60% of the total global output and way ahead of the next bigger producer: Malaysia (18.7 mt).
- It is also the world’s No. 1 exporter of the commodity, at 29 mt, followed by Malaysia (16.22 mt).
Plausible factors
Ongoing War
- The possible reason has to do supply disruptions — manmade and natural — in other cooking oils, especially sunflower and soyabean.
- Ukraine and Russia together account for nearly 80% of the global trade in sunflower oil, quite comparable to the 90% share of Indonesia and Malaysia in palm.
- Russia’s invasion of Ukraine has resulted in port closures and exporters avoiding Black Sea shipping routes.
- Sanctions against Russia have further curtailed trade in sunflower oil, the world’s third most exported vegetable oil after palm and soybean.
Diversion for Bio-Fuels
- Another factor is linked to petroleum, more specifically the use of palm oil as a bio-fuel.
- The Indonesian government has, since 2020, made 30% blending of diesel with palm oil mandatory as part of a plan to slash fossil fuel imports.
- Palm oil getting increasingly diverted for bio-diesel is leaving less quantity available, both for the domestic cooking oil and export market.
Impact on India
- India is the world’s biggest vegetable oils importer.
- Out of its annual imports of 14-15 mt, the lion’s share is of palm oil (8-9 mt), followed by soyabean (3-3.5 mt) and sunflower (2.5).
- Indonesia has been India’s top supplier of palm oil, though it was overtaken by Malaysia in 2021-22 (see above table).
- The restrictions on exports, even in the form of levy, take into cognizance Indonesia’s higher population (27.5 crores, against Malaysia’s 3.25 crore) as well as its ambitious biofuel program.
- To that extent, the world – more so, the bigger importer India – will have to get used to lower supplies from Indonesia.
Source – The Indian Express
