A delegation of the Solvent Extractors’ Association of India (SEA) — which met an Indonesian delegation headed by Zulkifli Hasan, Minister of Trade, in New Delhi recently — has advised Indonesia to ensure a stable policy for the export of palm oil from that country.
Referring to the recent ban on the export of palm oil from Indonesia, the SEA delegation said it had caused supply chain issues in India, and put a dent in the Indonesian policy decision-making. Because of this, Indonesia lost its market share to Malaysia, and overall palm oil lost the market share to soft oils in India.
The Indonesian Trade Minister, who took the feedback positively, ensured that there would not be any such supply crunch from Indonesia. The SEA delegation advised and requested the Indonesian Trade Minister to have stable tax regime on export duty/levy so that less is left on speculation on what the government is going to do next.
Domestic market obligation
Raising the issue of domestic market obligation (DMO) in Indonesia, SEA said Indonesia was not able to clear its huge stocks despite the exports resuming. SEA attributed DMO as the reason for this situation.
The Indonesian Minister, who accepted this, said Indonesia is trying to strike a balance between higher FFB (fresh fruit bunches) prices for farmers and lower olein prices for consumers. FFB prices have recovered with the opening of palm oil export.
With DMO, the Indonesian government wants to ensure that consumers also get oil in the local market. He mentioned that approximately 7-8 per cent of oil is what Indonesia requires for its domestic market. That is why it has increased the ratio of domestic consumption versus exports from 1:7 to 1:20.
Advantage refined oil
On the difference in export tax and levy on refined products and crude palm oil, SEA suggested the Indonesian delegation not to give advantage to refined products. Being one of the largest consumers, India has a lot of refining capacity. Any advantage given to refined products at origins makes refining unviable in India, which is not sustainable in the long term, as this might give an advantage to soft oils where the refining capacity can be utilised and refiners can make some margins.
On the bio-diesel mandate of the Indonesian government, the SEA delegation said it is not good to burn the edible oil when there are still some developing and underdeveloped countries fighting hunger and poverty.
Asked if Indonesia is giving a rethink over the B-35/B-40 bio-diesel mandate, the Indonesian Trade Minister said the country understands the situation. However, it needs to counter the imports of biofuels in Indonesia and ensure that its farmers get better realisation, and hence it has started the trials. However, he did not give any clear picture of whether Indonesia will surely go for B-40.
The meeting discussed various issues, including ways to step up export of crude palm oil from Indonesia to India, to reduce its burdensome stock in that country.
SEA advised the Indonesian Trade Minister that palm oil is still viewed as poor man’s oil in India and perceived as unhealthy oil. That is the reason why palm oil is not consumed widely in the common households and primarily used for out-of-home consumption. The SEA delegation advised Indonesia to form a palm promotion council jointly with SEA, and together they try to change the negative image of palm oil. It also suggested the Indonesian delegation to earmark some funds for the promotion.
The SEA delegation was headed by Atul Chaturvedi, President of the SEA Delegation. Other members in the delegation were BV Mehta, Executive Director of SEA; Ajay Jhunjhunwala, President-elect of SEA for 2022-23; Sanjeev Asthana, Chief Executive Officer (CEO) of Patanjali Foods Ltd; Angshu Mallick, Managing Director (MD) and CEO of Adani Wilmar Ltd; Sandeep Bajoria, CEO of Sunvin Group; Vijay Data, MD of Vijay Solvex Ltd; Aashish Acharya, Vice-President (International Trade), Patanjali Foods Ltd; Saumin Sheth, COO of Adani Wilmar Ltd; Vidya Bhushan, Head (Edible Oils), Bunge India Pvt Ltd; KTV Kannan, MD of KTV Health Food Pvt Ltd; and Suresh Motwani, General Manager (Oilseeds), Solidaridad Network India Pvt Ltd.
August 25, 2022