Business Today
Loading...

Adani, Patanjali and Emami to gain from restrictions on Malaysian palm oil

All these Indian edible oil companies have been struggling with underutilisation of their capacities; India is the world's biggest palm oil buyer and is a major market for the world's second-largest producer Malaysia

twitter-logo Nevin John   New Delhi     Last Updated: January 24, 2020  | 13:45 IST
Adani, Patanjali and Emami to gain from restrictions on Malaysian palm oil
Malaysia's refined palm oil shipments to India surged to about 2.66 MT last year from 650,000 tonnes in 2018

Modi government's restrictions on import of refined palm oil from Malaysia seems like a blessing in disguise for domestic edible oil manufacturers like Adani Wilmar, Emami Agrotech, Cargill, Gokul Agro Resources and Patanjali Ayurved, which recently acquired bankrupt edible oil major Ruchi Soya.

All these companies have been struggling with underutilisation of their capacities. The cost of imported refined palm oil from Malaysia is much cheaper than those refined in India, leading to a major underutilisation of refinery capacities.

Also read: After palm oil, India may impose import curbs on other crucial items from Malaysia

Irked by Malaysian Prime Minister Mahathir Mohamad's criticism on domestic issues like CAA (the Citizenship Amendment Act) and Kashmir, the Modi government has come up with curbs on exports from the Southeast Asian country. Kuala Lumpur's refusal to revoke the permanent resident status of controversial Islamic preacher Zakir Naik has also become a contentious issue in the trade relations between the Asian countries. India is the world's biggest palm oil buyer and is a major market for the world's second-largest producer Malaysia. Palm oil accounts for around 45 per cent of India's edible oil consumption.

BV Mehta, executive director, the Solvent Extractor's Association of India (SEAI), says the capacity utilisation of domestic edible oil refineries has come down 40 per cent in 2019 from 60 per cent in the previous year. "The whole industry was on the verge of a shutdown. There was no other option if the government wouldn't have invoked the restrictions on the import," said Mehta.

Also read: Shun Malaysia, India's palm oil buyers told amid Kashmir standoff

Notably, there's no restriction for importing crude (non-refined) palm oil from Malaysia. It would help the refining companies import the crude and refine it in India, said Mehta. "The industry has been demanding restriction on imports for some time now. We import 9.5 million tonnes (MT) of palm oil every year," he said.

Malaysia's refined palm oil shipments to India surged to about 2.66 MT last year from 650,000 tonnes in 2018, while exports of the crude variety dropped to 1.75 million tonnes from 1.87 million tonnes. Indonesia is the largest crude palm oil (CPO) supplier to India.

Adani Wilmar, which sells edible oil under the Fortune brand, has the largest range of edible oils spanning across the categories of soya, sunflower, mustard, rice bran, groundnut and cottonseed. It can produce 16,800 tonnes of refined oil a day. The reduction in the refined palm oil import is expected to increase the usage of other edible oils, in which players like Adani, Ruchi Soya and Emami are stronger.

Yoga guru Baba Ramdev's Patanjali acquired Ruchi Soya for Rs 4,350 crore through an insolvency process recently. Ahmedabad-based Gokul has all verities of edible oils, besides Palmolein and Vanaspati. Cargill sells Gemini brand of cooking oils, including sunflower, Soyabean, Groundnut and Vanaspati.

In the last decade, the Indian edible oil import has grown at a compounded annual growth rate of over 8 per cent. Around 15 per cent of it is refined oil. The remaining imported crude edible oil is refined in the plants predominantly situated near ports in India.

The existing duty differential between CPO, refined, bleached, and diodised (RBD) oil -- which stands at 7.5 per cent -- protects domestic refiners against competition from imported refined oils to a certain extent. The government on January 1 slashed the import duty on refined palmolein to 45 per cent from 50 per cent, while that on CPO to 37.5 per cent from 40 per cent. The restriction was imposed a week later.

Also read: Malaysia's Mahathir stands by Kashmir comments despite India palm oil boycott 

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close