Indonesia bans palm oil export, world to face the jitters

Indonesia has decided to ban the export of palm oil from April 28, the country’s President Joko Widodo announced on Friday. Widodo said the decision has been taken to control skyrocketing domestic prices and ensure availability of food products at home. “I will monitor and evaluate the implementation of this policy so availability of cooking oil in the domestic market becomes abundant and affordable,” he said in a video address. 

Indonesia is the world’s biggest exporter of palm oil. On February 21, we had reported how one litre of palm oil was selling for up to Rs 22,000 Indonesian rupiah! The country introduced restrictions on palm oil exports in late January, but lifted them in March – a move that sent global prices to historic highs. 

India has been adversely affected by increasing prices of palm oil as well, for it is one of the biggest importers of vegetable oil. India imports nearly 60 per cent of its edible oil, and palm oil comprises 60 per cent of this demand. Indonesia supplies around half of our palm oil requirements and the crisis in this Southeast Asian country has upped edible oil prices in India by 20-25 per cent already – with the ban expected to push up prices further. 

Till a few years back, Indonesia alone supplied close to 65 per cent of India’s palm oil demands. Since last year, however, Malaysia partially surpassed it, after Indonesia imposed heavy taxes on palm oil exports. In March 2022, India imported a total of 10,51,698 tonnes of edible oil against 9,57,633 tonnes in March 2021 – a rise of nearly 10 per cent. 

The decision to ban palm oil export by Indonesia has triggered price shockwaves across the globe, and prices of soya, refined and sunflower oil are expected to soar soon. According to the Chicago Board of Trade, soya oil prices have already spiked by 4 per cent. 

Indonesia is the second Asian country after Sri Lanka to reel under severe inflation. The biggest reason for the sky-rocketing price of palm oil is the Russia-Ukraine war. Both countries are said to be the biggest producers of sunflower and soyabean oil and together produce 80 per cent of the global demand. But with supply stopped since the start of the war on February 24, the world has turned towards the closest substitute, i.e. palm oil. And this has increased the global demand for palm oil, leading to more exports than usual for Indonesia. 

On the other hand, when Indonesian authorities tried to control prices of palm oil, it led to increased hoarding. The government had fixed the price of branded oil to 14,000 Indonesian rupiah and that of crude palm oil to 9,300 Indonesian rupiah. At the same time, one person was allowed to but only 2 litres of palm oil at once and exporters were instructed to sell 30 per cent of the produce in the domestic market. But traders opposed the move, and thus began increased hoarding. (With agency inputs)