INDONESIA’S PALM OIL CRISIS

About:

• The US Department of Agriculture (USDA) has estimated the archipelago’s 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).
  
  
• Yet, the country has seen domestic prices of branded cooking oil spiral, from around 14,000 Indonesian rupiah (IDR) to 22,000 IDR per litre between March 2021 and March 2022.
  
  

There are two possible reasons.

• The first has to do supply disruptions — manmade and natural — in other cooking oils, especially sunflower and soyabean.
  
  
• The second 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.
  
  

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.