The Indonesian government has announced that they will be banning export of palm oil from April 28th in a bid to reign in domestic inflation.
Indonesia is the world’s largest palm oil producer and the largest consumer as well. It accounts for over 50% of global palm oil production. Malaysia ranks 2nd with 25% of global production. Price of palm oil has increased by 40% since the beginning of 2022.
Palm oil is an indispensable commodity as it is used in a variety of products ranging from edibles like chocolate, vegetable oil and ice cream to detergents, soaps and even lipstick. It is also an important ingredient in biodiesel.
India has an annual consumption of over 9 million metric tonnes as it is the world’s largest importer of crude palm oil. Palm oil is so important to our economy that the government reduced taxes in February 2022 to assist oil refiners and consumers reduce prices.
Experts believe that the ban, coupled with loss of sunoil imports due to war in Ukraine & loss of canola oil imports from Canada and Europe due to poor crop yield, could result in an immediate inflation of 10%. This ban could also push inflation in India through the 7% mark that it had been skirting for the past 3 months.
Highlight by Aman Agarwal.