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Palm oil becomes expensive in Indonesia, know what will be its effect on India?

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Indonesia is the world’s largest producer of crude palm oil (Indonesia is the largest producer of CPO). Yet it is grappling with the palm-oil crisis. The current situation is such that the prices of palm-oil have climbed there like gold. The price of 1 liter of branded refined palm oil reached Rs 22,000 (Indonesian currency) in March 2022. In March last year, the price of the same product was Rs 14,000. The skyrocketing palm oil prices in Indonesia are being felt around the world. Naturally on India too as Indonesia also exports the largest CPO to all the countries of the world. Apparently other vegetable oils are also being affected. As well as on the common man because vegetable oil is an integral part of every household diet. It may therefore interest everyone to know the aspects related to Indonesia’s palm-oil crisis. So let’s understand it in 5 steps.

Palm oil becomes expensive in Indonesia know what will be

Private traders are raising palm oil prices in Indonesia

According to the Indonesian Bureau of Statistics, the country produced 4480 million tonnes of CPO during the year 2020. 60% of this production was done by private companies. The remaining 34% is by mango farmers and the remaining 6% by government companies. This means that almost the entire private traders are farmers in the total CPO production of the country. Experts say that in view of the local and global situation, these traders have created a palm-oil crisis in Indonesia. Its trade minister, Muhammad Lutfi, has recently blamed the oil and gas mafia for the crisis.

Palm oil becomes expensive in Indonesia know what will be.webp

The largest global states are Russia-Ukraine and US-China
According to economic experts, one of the global conditions witnessed by Indonesian private palm oil traders was the Russia-Ukraine conflict. It is noteworthy that even though Russia attacked Ukraine on February 24, but it had deployed its troops on the Ukrainian border months earlier. From there the commotion started. Because Russia and Ukraine together supply about 75% of the world’s sunflower oil. And the tension between them affected its supply, so the demand for crude palm oil (CPO) started increasing. At the same time, the US-China trade dispute between the US and China continued. As a result, China stopped buying soybeans from the United States. Instead, palm oil imports and consumption increased. Later, major soybean producers such as Brazil and India exported less due to inclement weather. The combined result of all this is that the demand for CPOs has increased tremendously around the world.

When the Indonesian government tried to curb prices, hoarding started
The Indonesian government tried to stem the skyrocketing palm oil prices in the country. It has fixed a maximum price of 1 liter of branded refined palm-oil at Rs 14,000. The maximum price of CPO was also fixed at Rs 9,300 per kg. At the same time it is also ensured that the common man can buy only 2 liters of ordinary oil (non-refined) at a time. In addition, CPO-exporters were required to sell 30% of their products in the domestic market. so that the local supply is sufficient. Earlier this range was 15-20%. All this has been opposed by the private traders there, who have started stocking palm oil. This means that they are neither in sufficient supply for the domestic market nor for export.

India is the largest importer of edible oil in the world, therefore
The conditions created in Indonesia have naturally affected India. This is because India is the world’s largest importer of edible oil in terms of edible oil. Government figures show that India imported 12.70 lakh tonnes of edible oil in January. Which is 16% more than 10.96 lakh tonnes in January last year. It is also worth noting that palm oil accounts for 60% of India’s total edible oil imports. That means heavy reliance on palm-oil supplier countries like Indonesia.

In India, edible oil prices have increased by about 25%, prompting the government to act quickly
Inflation Weekly, monthly data shows Indonesia’s palm-oil crisis pushed up edible oil prices in India by 20-25%. To stop them, the government has made several alternative arrangements. For example, customs duties on palm oil imports have been reduced. Earlier, the duty on refined palm oil was 19.25 per cent. Looks like 13.75% now. Along with this, the import of soybean and sunflower oil has also increased. For example, in January alone, 3.91 lakh tonnes of soybean oil was imported. In January last year, only 88,667 tonnes of soybean oil was imported. Similarly, in January also 3.07 lakh tonnes of sunflower oil was ordered. It was 2.05 lakh tonnes in January last year. According to a Business Today report on March 29, India recently imported 45,000 tonnes of sunflower oil from Russia. That too at a record price of $2,150 per tonne (about Rs 1.63 lakh). Before the Russo-Ukrainian war, the same price was $ 1,630 (about Rs 1.23 lakh) per tonne. With such a move, the government hopes that it will not allow edible oil prices to spiral out of control in India.

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