Cooking oil prices to cool as Indonesia lifts export ban

Cooking oil prices in the domestic market are set to soften after Indonesia, the world’s largest producer of palm oil, Thursday decided to lift its export ban from next week. A prolonged ban would have doubled prices as India is the largest importer of palm oil from the Southeast Asian country.

A commerce ministry official said Indonesia ran out of storage capacity in less than a month after announcing a sudden export ban on 28 April. “This was the chief reason they have lifted the export ban,” he added.

India imports about 8 million tonnes of palm oil annually and the commodity accounts for nearly a 40% share of its overall edible oil consumption basket. Indonesia accounts for nearly 48 million tonne (mt) of palm oil out of the 75 mt produced globally every year and it is the country’s leading source of revenue.

“Indonesia’s domestic consumption of palm oil is much less than their production, so this decision was on the cards. But it has come much earlier than we expected. It will soften the prices and check food inflation that has jumped sharply,” Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said in an interview.

India is in the midst of record-high retail inflation driven by rising prices of food and fuel. Food inflation in April soared to 8.38% from 7.68% in March.

Indonesian President Joko Widodo said the supply of bulk cooking oil surpassed optimum levels and would help ease the prices of cooking oil in Indonesia. “In several regions, I know prices of cooking oil are still relatively high, but I believe in the coming weeks, they will be more affordable,” Reuters quoted Widodo as saying earlier in the day.

The announcement came a month after Indonesian lawmakers urged the government to review the ban due to its adverse impact on farmers and labourers involved in producing palm oil.

Palm oil imports from Indonesia are of special significance to India as palm oil and its derivatives are used in the production of several household goods such as soaps, shampoos, biscuits and noodles.