Importing Palm Oil.........
HS Code : 15119000
India is the world’s biggest importer of palm oil. Interestingly, over the last one year, while imports of crude palm oil has been on a decline, that of refined palm oil has been rising sharply. Export taxes by major producers like Indonesia and Malaysia have a lot to do with this anomaly as does India’s custom duties
If you are one of those health-conscious people who use palm oil for their daily cooking needs, chances are, you have been buying oil produced in either Indonesia or Malaysia. Yes, you have been a consumer of imported palm oil all this while. And even if buying locally produced palm oil was your want, it’d be rather hard to fulfil it. The reason is simple – in the last few years, Indian producers of palm oil have not been able to catch up with the growing domestic demand for the product.
Data from US Department of Agriculture reveals that the domestic consumption of palm oil in India has increased from 7,000 metric tonne (MT) in CY1964 to a humongous 10.20 million metric tonne (MMT) in CY2016. In fact, India’s consumption of plam oil increased 10.8% just between CY2015 and CY2016. To add to that, of all the edible oils that are consumed in the country, palm oil constitutes a major share – especially refined bleached and deodorised palmolein oil (RBD palmolein oil). And, guess what! Experts say that the demand for this commodity is only going to go one way from here – upwards! Looks like a good business to get into? And if you’re thinking whether it’s worth investing in the imports business of palm oil, let us tell you that all facts lead to the conclusion that India cannot do without importing palm oil in one form or the other.
The Indian palm oil market size will reach $13.1 billion by 2025. “Rapid urbanisation and changing lifestyles backed by increasing disposable income in India have influenced consumption trends of consumers. So, what makes India its biggest importer? And why experts believe that imports of palm oil will only grow going forward? Well, there are many factors at play – one, India’s hard summer is harmful for the palm plant which effects yield drastically; two, palm trees consume too much of water; three, there isn’t enough land for cultivation; four, India lacks infrastructure, expertise and modern technology. Well, this list could go on forever. Further, while India’s population continue to rise, consumption shows no signs of slowing down. Result: the demand for palm oil is bound to grow in the foreseeable future. And with domestic production not being able to keep up with the rising demand, importing palm oil remains the only option.
Millions rely on palm oil to feed their families, especially in countries with a growing population, like India. Further, the benefits of palm oil are being slowly realised as it can also be used in many solid fat formulations without the need for hydrogenation. When used in this fashion, it does not contain trans fatty acid and that makes it a healthy oil. Also, it does not contain any cholesterol and is a good source of vitamin E.” This indicates that the popularity of this edible oil will keep growing.
RBD palmolein, the variety of palm oil that India has been increasingly importing over the last few years, is currently only being sourced from Indonesia and Malaysia, with Indonesia accounting for about 80% of India’s total imports of the product. While India imported RBD palmolein worth $1.58 billion in FY2016, the import value of the product stood at $1.78 billion in FY2017 (till January). What’s more? Between FY2010 and FY2016, India’s imports of RBD palmolein grew by over 55%.
Even when it comes to crude palm oil, it’s again Indonesia and Malaysia – and in very small quantities Honduras, Papua New Guinea, Philippines, Guatemala and Colombia – that have been feeding India’s humongous appetite for the product. While Indonesia contributes to about 59% of India’s imports of crude palm oil, Malaysia contributes 40%.
One fact that’s worth noting though is that India’s imports of crude palm oil have been declining over the last few years – from $5.4 billion in FY2015 to $4.2 billion in FY2016, and to $3.2 billion in FY2017 (April-January period). While in value terms crude palm oil is still being imported more than RBD palmolein, the growth trajectories of the two sure point to the fact that RBD palmolein is a better bet for importers, at least for the foreseeable future.
And meanwhile if you were wondering what makes Malaysia and Indonesia two preferred sources of India’s palm oil imports, you need to know that the two countries together account for about 85% of the world exports of palm oil.
We all know that the business of agri-commodities does come with its fair share of challenges, and not the least of which is monsoon. According to latest government estimates, the domestic production of cash crops is expected to be higher this year because of favourable monsoon. Estimates suggest that the domestic production of palm oil would be up 8% this year, reaching 271.98 MT as compared to 251.57 MT in the previous year. But, what goes in favour of importers is the fact that this is still a tiny fraction of India’s demand for the product. The production may be increasing, but at the same time the consumption is also rising. So, to meet the deficit, imports will continue to grow
Considering all this, the future definitely looks bright for the importers of RBD palmolein. “Imports of palm oil will continue at a steady pace because there is a huge shortage of edible oils in India. If we increase domestic production of edible oils by at least 20%, then it will be a different story altogether. No doubt we have mustard and soya oil, but since consumption is really high in India the demand can be met only through imports of palm oil,”
Industry experts believe that India might try hard, but its domestic production of palm oil will never be enough to satiate an ever-increasing demand. Not at least in the ftoreseeable future. Interestingly, National Mission on Oilseeds and Oil Palm has also been reinvented time and again without making much of a difference to oilseed production. This obviously means music to ears for palm oil importers. While production in India could be an option, importing RBD palmolein from either Malaysia and Indonesia and selling in Indian market makes more sense at the moment.
What’s more? With demand for palm oil expected to move northwards in India, margins are bound to expand. Sounds lucrative, doesn’t it?
India imports 15 MMT of edible oils every year, of which 9 MMT is palm oil.