Jakarta – India will reportedly start reducing significantly its import of crude palm oil (CPO) by taking strategic steps to develop own oil palm plantations in Telangana state.
India consumes around 24 million tons of vegetable oils per year, of which around 10.5 million tons are fulfilled through domestic production while the other 13.5 million tons are imported.
Of the imported vegetable oils, around 8-8.5 million tons are palm oil products, of which 45% are imported from Indonesia and the rest from neighboring country Malaysia. Based on data from Reuters, India is the largest importer of CPO from Indonesia, which accounts for 21.3% of the total imports of CPO during the period of 2016-2020.
But as reported, the high price of CPO has made the import value of India surging and triggering inflation. In 2021, India’s imports of vegetable oils reached US$18.9 billion, causing its deficit in balance of trade surging.
Now, the government of India has started opening the oil palm plantations in the region of Telangana, with the target of 2 million hectares during the next 4 years.
If the target realized, then the Telangana region is expected to produce 4 million tons of CPO per year within the next 7 to 8 years ahead.
“During the next 4 years, most of the oil palm plantations will be finalized and in the next 7 – 8 years Telangana will be able to produce 4 million tons of palm oil,” L Venkatram Reddy, horticulture director at the regional government of Telangana state was quoted by Reuters as saying on Wednesday, 03 August 2022.
Impact to Indonesia?
With a total exports of 33.67 million tons in 2021, Indonesia is the world’s largest exporter of palm oil and the third largest exporter of vegetable oils. Indonesia’s contribution to total global exports of vegetable oils is estimated at 60%. The CPO is chosen by many countries not only as raw material to produce cooking oil but also for the production of foods, cosmetics, detergents and biofuel.
Based on data from Statistics Indonesia (BPS), during the period of January-July 2022, Indonesia had exported CPO to India at a total of 1.45 million tons with a value of US$2 billion or Rp30.5 trillion (Rp15,225 per US$). But the value dropped by 1.73% if compared to the same period in 2021. During 2021, India imported a total of 3 million tons of CPO from Indonesia at the value of US$3.28 billion or around Rp48.4 trillion.
If India can locally produce additional CPO, then it will cut its import of CPO from Indonesia. It will reduce Indonesia’s foreign exchange from palm oil exports. It will also affect local CPO producers in Indonesia and if they could not find new markets for their production it will certainly cut their sales.
Based on the data, if India decides to stop import of CPO from Indonesia, Indonesia is potential to lose around Rp48.4 trillion per year. (*)
Source: cnbcindonesia.com
