India asks Indonesia to raise palm oil supply as prices spike

India has asked Indonesia to increase palm oil shipments to the country to compensate for a loss of sunflower oil supplies from the Black Sea region due to the Ukraine crisis, several government and industry sources in India told Reuters.

India, the world's biggest buyer of edible oil, relies on top producer Indonesia for more than half of its palm oil imports, but has been worried by restrictions Jakarta put on its exports in January to calm local prices.

Limited palm supplies, followed by the halt in exports of sunflower oil from the Black Sea region - which accounts for 60 percent of world sunoil output and 76 percent of exports - have sent global vegetable oil prices to record highs.

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In India, the landed cost of imported crude palm oil has risen 38 percent since Indonesia announced export curbs on January 27. The cost of soyoil, the second most consumed oil in India after palm, has surged 29 percent this year, while sunoil suppliers have stopped offering the oil after Russia invaded Ukraine.

Ukraine and Russia accounted for nearly 13 percent of India's edible oil imports last year, supplying 1.6 million tonnes.

Indian government officials held a virtual meeting with Indonesian authorities this week on stepping up palm exports to India, a "reliable big buyer", said two government sources with knowledge of the matter.

New Delhi has also asked Jakarta to temporarily lower its biodiesel blending rules, which mandate that 30 percent of all biodiesel sold in the country be derived from palm oil.

"For a short time Indonesia can give preference to food over fuel," said one of the sources.

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India's Ministry of Commerce and Industry did not immediately respond to a request for comment. Indonesia's trade ministry officials did not immediately respond to requests for comment.

India fulfils more than two-thirds of its edible oil demand through imports, of which palm oil accounts for more than 60 percent.

India has slashed taxes on vegetable oil imports four times in the past eight months and even allowed overseas buying of refined palm oil instead of only crude oils, though prices have still stayed high.

Russia's invasion of Ukraine and a drought in the biggest soyoil exporting region of South America have stymied New Delhi's efforts.

Crude palm oil is now being offered at about USD 2,075 a tonne, including cost, insurance and freight (CIF), in India for March shipments. A year ago, CPO was available at USD 1,089.

"Edible oil prices have become a major challenge for us and we are reaching out to everyone," one of the government sources said.

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India is also exploring increasing soyoil imports from South America and the United States and rapeseed oil from Europe, but these destinations cannot increase supplies quickly because of the distance and limited availability, said a senior industry official who attended a government meeting on the matter last week.

"The quickest way to increase edible oil supplies is to bring in more palm oil," said the industry official, who declined to be named. "Only Indonesia can fulfil Indian demand."

India's own supplies of rapeseed oil from the new season crop could pick up from next month and help ease supplies, said B.V. Mehta, executive director of the Mumbai-based Solvent Extractors' Association of India.

"There is no need to panic," he said. "Local oilseed crushing will pick up in the coming months, and edible oil supplies will improve."