KUALA LUMPUR: India’s move to restrict palm oil imports from Malaysia will create a huge challenge for the world’s second biggest producer of the edible oil as India has been its top market for the past five years.
India, the world’s largest buyer of edible oils, last week restricted imports of refined palm oil and effectively halted all palm oil purchases from Malaysia in retaliation for criticism by the Malaysian prime minister of India’s policy towards Kashmir.
The Indian government withdrew the autonomy of Kashmir last year to tighten its grip on the region, shutting down internet access and detaining activists and politicians. Malaysian Prime Minister Mahathir Mohamad said recently that Hindu-majority India was “invading and occupying the country” of Jammu and Kashmir.
India has been Malaysia’s top import market since 2014, according to industry data.
Last year, India bought 4.4 million tonnes of palm oil from Malaysia, accounting for 24 per cent of all Malaysian palm oil exports.
The second biggest buyer of Malaysian palm oil, China, bought just 2.4 million tonnes last year, while the third largest buyer was Pakistan with 1.08 million tonnes, according to data from the Malaysian Palm Oil Council.
Malaysia is talking to the Indian government and trade officials in a bid to resolve concerns over New Delhi’s import restrictions, Teresa Kok, Malaysia’s minister in charge of palm oil, said on Thursday.
She has flagged Africa and central Asia as emerging markets for Malaysian palm oil, and said Malaysia will continue efforts to increase share in the Middle East.
But replacing India and getting other countries to buy Malaysian palm oil may not be easy.
Indonesia, the world’s biggest producer of palm oil, boasts lower production costs and has a bigger share of the market in many palm oil-consuming countries. It has also historically offered palm oil at cheaper prices than Malaysia, although recently Malaysian export prices have slumped below Indonesian rates as Indian buyers retreated from the market.
Leading industry analyst James Fry said India’s restrictions will shift Indian crude palm oil purchases from Malaysia to Indonesia, and Malaysia may end up selling more refined palm oil globally.
On Wednesday, Reuters reported that India was planning to widen curbs on Malaysia beyond palm oil, a move that could further hurt Malaysian revenue.
India is the seventh biggest market for all Malaysian exports, while Malaysia is India’s 17th largest export market.