IGNORE the noise over India’s “soft ban” of processed palm oil (PPO), said a commodities expert, as the decision could be a blessing in disguise for Malaysia, a major exporter of the product.

This is because India’s decision will create a shortfall for PPO in other markets that Malaysia can fill, said the expert on the sidelines of a palm oil seminar in Kuala Lumpur.

India’s decision will mean that it has to import more crude palm oil (CPO) from Indonesia to be processed by its local mills into PPO, said Dr James Fry of London-based LMC International Ltd.

When India buys more CPO from Indonesia, the latter will have less of the unrefined oil to turn into PPO and to export to its usual customers.

“There is a huge demand for refined palm oil as most of the world imports that kind of palm oil,” said Fry, adding that importing countries do not have the capacity to turn CPO into PPO.

The world’s No. 2and No.3 export markets for palm oil, China and the European Union, for instance, only import PPO.

“Only India buys a lot of CPO. So, when India wants to buy more from Indonesia, Indonesia cannot do both at once. Indonesia cannot export more CPO to India and have enough left over to refine and sell to their usual customers.

“It also has to use its own CPO for its mandate on biodiesel,” Fry said, referring to the country’s policy to increase biodiesel use.

“There will be a gap in world PPO supply. And the only other country that can feed that gap is Malaysia.”

In 2019, Malaysia exported 14.64 million tonnes of PPO as compared to 3.83 million tonnes of CPO.

Malaysia will be in the indirect beneficiary of India’s decision since its PPO will be sold to markets that used to buy from Indonesia.

“It’s a zero-sum game. You push something down here, it will go up somewhere else.

“It’s a roundabout situation because if one producer cuts down, the other will pick up the slack,” said Fry, adding that demand for PPO the world over is stable and growing.

Last week, India increased its local tax on imported refined palm oil (PPO) to 45% while the tax on crude palm oil (CPO) remains at 37.5%.

New Dehli also reclassified PPO as “restricted” from “free” in its import rules.

Local industry players are worried that the decision would impact on exports to India as Malaysia sells more PPO to the South Asian country as compared to CPO.

In 2019, Malaysia exported about 4.4 million tonnes of palm oil products to India – its largest customer.

New Delhi made the decision so as to help its own oil seed milling industry.

Primary Commodities Minister Teresa Kok said that Malaysia is using diplomatic channels and meeting with stakeholders to overcome the restriction. – January 17, 2020.