Indonesia has decided to stop exporting palm oil from the last week of April. With this one decision, FMCG sector items like soap, shampoo, biscuits, toothpaste along with edible oil can become expensive in India. Due to this, the retail inflation rate for April is also expected to be affected. Retail inflation for March has already reached the level of 6.95 percent. Palm oil in India is used in the production of FMCG items from food to soap, biscuits, toothpaste, and shampoo. India imports 8 million tonnes of palm oil annually and imports 4 million tonnes from Indonesia. Indonesia is the largest palm oil producer in the world with a share of 62 percent. Malaysia is number two, but it is not able to meet the world's palm oil requirement.
On Monday, the price of palm oil reached the highest level in the last two weeks, experts say that the price of palm oil may continue to rise. There was an increase in the share prices of edible oil companies. FMCG companies may have to increase the prices of products to manage the increased cost or else their margins will be affected. Due to the decision of Indonesia, the increase in the prices of edible oil in India is also believed to be fixed. The consumption of edible oil in India is 225 lakh tonnes and this includes 8 million tonnes of palm oil. In case of a shortage of palm oil, there will be pressure on other edible oils, which will increase their prices.
Sunflower oil imports are already affected due to the Russo-Ukraine war and the prices of edible oil are increasing continuously. In March, the prices of edible oil and vegetable ghee increased by 18.79 percent as compared to March last year and it is believed to be a major contributor to the rise in the inflation rate of retail items. In February this year, the prices of edible oil and vegetable ghee had increased by 16.44 percent. Indonesia's decision will also make imports of other edible oils expensive, which will increase the import bill. With edible oil becoming costlier globally, India imported edible oil worth Rs 1.4 lakh crore in the financial year 2021-22 as against Rs 82,123 crore in the financial year 2020--21.
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