With India’s broad plan to go self-reliant, every crisis is an opportunity for the country. The latest crisis being faced by the country is the ban on Palm oil export by Indonesia. However, this could be a blessing in disguise for the country. Palm oil is in news again. Last time, it was in the news when the radical Mahathir Mohamad regime was in power in Malaysia. Indo-Malaysia ties had deteriorated under Mahathir Mohamad, which had created a risk of palm oil shortages as India used to import most of its palm oil from Malaysia. At that time, India substituted Malaysian imports by moving toward Indonesia.
Read more: No more Palm oil from Malaysia and Indonesia, India is all set to become ‘aatmanirbhar’
Now, Indonesia is looking to block exports of palm oil. It may seem like a fresh crisis but this time it could be an opportunity for India to become self-reliant in the palm sector. How? Let’s find out.
Indonesia blocks the export of palm oil
Indonesia has announced a ban on the export of palm oil to other countries starting April 28. It has imposed the ban due to the shortage and soaring prices of edible oil in the Southeast Asian nation. Indonesia is the biggest producer of palm oil, but the prices of the commodity have been rising due to the ongoing Russia-Ukraine war.
India major importer of Indonesian palm oil
For India, Indonesia’s decision to ban palm oil is actually quite significant. India is the largest importer of palm oil in the world and imports around 8-8.5 million tonnes of palm oil every year. Over half of its edible oil imports are driven by palm oil.
Nearly, 45 per cent of India’s palm oil comes from Indonesia and the rest is imported from Malaysia. India imports somewhere around 4 million tonnes of palm oil from Indonesia.
Indispensable
And it is not just the quantity that matters, but also the important applications of palm oil across different industries.
Palm oil and its derivatives are used in various industries including food products, detergents, cosmetics and biofuels. It is also used to manufacture daily consumption goods like soaps, margarine, shampoos, noodles, biscuits and chocolates. Palm oil shortages can therefore cause a shortage of several different consumer goods.
Parle Products Senior Category Head Mayank Shah said, “That’s (challenges) not just for the food companies but for FMCG (fast-moving consumer goods) companies at large because there are many other players beyond food firms, including those who manufacture soaps and other things. So, it’s going to be very challenging.”
Santosh Meena, head (research) at Swastika Investmart, echoed a similar sentiment and said, Palm oil and its derivatives are used in producing several goods for daily consumption such as soaps, shampoos, biscuits, and noodles. This will negatively affect FMCG companies like HUL, Nestle, Britannia, Godrej Consumer Products Ltd, Marico Ltd., etc. The high prices will leave packaged food products manufacturers, soap manufacturers, and other personal care manufacturers with no other option than to raise prices and thus affecting their volumes.”
The opportunity
Now, India has the option of relying more on Malaysia. Today, a moderate regime is in power in Malaysia and bilateral ties between New Delhi and Kuala Lumpur are on the right track.
However, importing palm oil from Malaysia could subject India to future risks all over again. What if another Mahathir Mohamad comes to power and embitters ties with India? What if global supply chains get disrupted due to another war in another corner of the world?
So, India needs self-reliance. And India does have a plan in place- During his Independence Day speech last year, PM Modi announced a scheme to boost palm oil production in high rainfall regions in the country. Since palm oil can be cultivated in regions with high rainfall, India’s Northeast carry a lot of potential in this particular area.
Presently, Assam’s Goalpura and Kamrup districts are engaged in palm oil cultivation but there is a need to expand the cultivation area even further.
India presently produces palm oil on over 3,00,000 hectares of land and an additional area of 6,50,000 hectares is to be brought under palm oil cultivation by 2025-26 as per the National Mission on Edible Oils – Oil Palm (NMEO-OP).
The idea is to enhance crude palm oil (CPO) production to 11.2 lakh tonnes by 2025-26 and up to 28 lakh tonnes by 2029-30. This can effectively make India self-reliant in the palm oil sector while also boosting the country’s agricultural sector and food processing industries.
All that India needs to do now is fast-track its plans, offer special incentives to farmers in the Northeast and go self-reliant in the palm oil sector as soon as possible. Indonesia’s ban on palm oil exports is thus a blessing in disguise for India.