Boosted by cuts in import duties, India’s palm oil exports are projected to rise 6% to 8.5 million tons for fiscal year 2020-21 and 3% to 8.6 million for fiscal year 2021-2022, according to a United States Department of Agriculture agency’s report.
Palm oil, the highest volume plant oil, is used primarily in foods and biofuels but also in renewable lubricants.
In its “Oilseeds: World Market and Trade” outlook published Nov. 9, the USDA’s Foreign Agricultural Service noted that India’s government effective Oct. 14 cut import duties on crude and refined palm oil. Effective June, India cut import duties on crude palm oil from 15% to 10% and on refined oil from 45 to 37.5%. This was followed by further cuts in the import duty in September – by 2.5% on crude palm oil and by 32.5% on refined palm oil.
Some global suppliers of palm oil have already increased exports to India, the agency noted. “Following the first wave of tariff reductions, palm oil imports in August and September more than doubled from the January-July 2021 monthly average,” the Foreign Agricultural Service said. “India’s latest import duty cut on palm oil is another effort by the government to reduce domestic oil prices and food price inflation among soaring global palm oil prices. The government has also limited stocking of edible oils and oilseeds through March in an effort to discourage importers from purchasing excess supplies to market after the duty reductions expire.”
Indonesia, the world’s largest producer of palm oil, has been the primary beneficiary of the increase in demand. “Indonesia exports maximized shipments ahead of their own September export tax hike on crude palm oil,” the Foreign Agricultural Service said. “Malaysia and Thailand palm oil exports to India also rose markedly in August and September.”
Although India decreased import duties on palm oil to increase imports in the near term, in August the country announced funding for a program aimed at raising the country’s production of crude palm oil up to 1.1 million tons by 2025-2026 and up to 2.8 million tons by 2029-2030 to alleviate dependence on imports.
Palm oil farmers produce fresh fruit bunches, from which oil is extracted. Prices of these bunches are linked to international crude palm oil price fluctuations. As of September, palm oil prices were up 56%, compared to September 2020, according to the International Monetary Fund’s global market price index for the commodity.