Ashraf Engineer
April 30, 2022
EPISODE TRANSCRIPT
Hello and welcome to All Indians Matter. I am Ashraf Engineer.
Indonesia has banned exports of palm oil and it couldn’t have come at a worse time for India. Prices were skyrocketing even before the announcement – in fact, edible oil prices were at historic highs, around 45% more than the previous highs recorded in 2008 and 2011. Indonesia’s decision will be a tremendous blow to the poor and the salaried class as edible oil prices will rise significantly at a time when inflation is soaring already. Indonesia is the world’s largest producer of palm oil and accounts for 45% of the total supplied to India. It’s a severe blow to India, the world’s largest importer of edible oils and the largest importer of palm oil.
SIGNATURE TUNE
Edible oil prices rose 19% in April-March and Indonesia’s export ban may result in a further 10% jump in prices. India consumes 22.5 million tons of edible oil every year, of which only 9-9.5 million tons is domestically produced. So, India imports 10.5 lakh tons of edible oil every month and closed FY22 with imports of 13 lakh tons. Though this is down from the 15 lakh tons the previous year, the import bill for edible oils in FY22 rose 72% to Rs 1.4 lakh crore from Rs 82,123 crore in FY21. It’s set to get worse.
It’s been a terrible 12 months for edible oil crops. COVID-19 meant that migrant labour was scarce in Indonesia’s palm plantations. This affected the output of palm oil, the most consumed cooking oil in the world – accounting for 40% of global consumption
Soyabean, the second most consumed edible oil, was hit by a poor crop in Argentina – the world’s largest exporter of soyabean oil. Argentina, too, halted exports briefly but resumed them later.
Canola is the world’s third most consumed edible oil. Canada and Europe, its largest producers, reported crop damage and, when Russia invaded Ukraine, it stopped sunflower oil exports.
No wonder cooking oil prices are at historic highs.
Cooking oil inflation is a further burden on severely stressed household budgets. India’s consumer price index hit a 17-month high of 6.95% in March and edible oils contributed significantly to it. With the latest price rise, inflation for the year may work out to a crippling 7%.
It’s not just cooking oil prices that will rise; the export ban on palm oil could hit raw material supplies and drive up prices of packaged consumer goods. Palm oil and its derivatives are used in producing several fast moving consumer goods such as soaps, shampoos, biscuits and noodles. So, all eyes are now on consumer goods companies like Hindustan Unilever, Godrej Consumer Products, Britannia and Nestle.
Parle Products, India’s largest biscuit maker, said Indonesia’s palm oil export is a major challenge for packaged consumer goods – especially because Malaysia, the second biggest palm oil exporter, is also facing a production shortfall due to the pandemic-induced labour shortage.
Over the past 12 months, palm oil prices have risen by 50% and nearly tripled over the past two years. Now, consumer goods firms will have to recalculate prices just as they have done over the past few quarters to make up for input costs. All of this will ultimately be passed on to you.
Thank you all for listening. Please visit allindiansmatter.in for more columns and audio podcasts. You can follow me on Twitter at @AshrafEngineer and @AllIndiansCount. Search for the All Indians Matter page on Facebook. On Instagram, the handle is @AllIndiansMatter. Email me at editor@www.allindiansmatter.in. Catch you again soon.
