Indonesia export ban on palm oil to affect Pakistan’s May stocks

LAHORE: Indonesian government’s ban on the export of palm oil would likely affect Pakistan’s ghee and cooking oil supply in May along with price hike as industry fears cancellations of bookings by suppliers under force majeure.

If Indonesian suppliers do so than the orders booked by Pakistani importers in the range of $1,500/tonne would go up to current prevailing price of $1,800/tonne, an industry official said.

Pakistan’s current palm oil stocks were around 200,000 tonnes, with around 60,000 tonnes arriving by the end of April. These stocks were sufficient to partially cover up the requirements of May. However, the palm oil supplies to Pakistan could also be disrupted due to the ban announced by Indonesia, officials anticipated.

Pakistan Vanaspati Manufacturers Association (PVMA) Chairman Tariq Ullah Sufi explained that the industry has already conveyed the expected shortfall to the Ministry of Industries and Production due to a ban announced by Indonesia. “We are hopeful that government of Pakistan will take up the issue with Indonesia,” he added.

Pakistan imports over 80 percent of palm oil from Indonesia and rest 20 percent from Malaysia.

The expected shortfall is not Pakistan specific, since Indonesia is the largest palm oil exporter, with production capacity of over 45 million tonnes annually as compared to 18 to 20 million tonnes produced by Malaysia.

At present the palm oil prices are hovering in the range of $1,750 to 1,800 per tonne. Moreover, the depreciating Pakistani currency against the dollar was yet another factor, which would result in a surge in prices of ghee in Pakistan in the near future, Sufi mentioned.

A senior official of the Ministry of Industries and Production said that the industry was on board and they were coordinating with other ministries to avoid any crisis. He admitted that the industry was continuously raising red flags on increasing international palm oil prices and devaluation of currency.

A plan was also under consideration to lower down the taxes by fixing ITP at certain level to keep the price in control. However, political uncertainty and change of government put the proposed plan on a backburner.

Moreover, the Federal Board of Revenue was reluctant to lower the ITP as it would affect its revenue collection, he added.

About suspension of palm oil exports by Indonesia to stabilise their local market, the official said that Pakistan has Preferential Trade Agreement with Indonesia and government to government involvement could provide exemption to Pakistan from Indonesian government export ban on palm oil.

However, there was need to approach the Indonesian government to avail the facility. India has already approached Indonesia under the same agreement and circumstances, he added.