MPOA sees business as usual amid India palm oil curbs threat
Last Update: 20/10/2019
By Nurul Hanis Izmir
KUALA LUMPUR, Oct 20 -- Given the strong bilateral trade relationship between Malaysia and India, the Malaysian Palm Oil Association (MPOA) is of the view that business will be as usual for both countries despite news that India is considering curbing imports of some Malaysian products including palm oil.
Its chief executive Datuk Nageeb Wahab said if India goes ahead with the drastic decision, it would also impact the country.
“If it materialises, India will have to source its palm oil for food from Indonesia and it would have to accept whatever price that Indonesia sets. Now, of course, it is selling palm oil at a cheaper price, but when they are the only market that India is sourcing from, they can hike the price and this is the implication that they have to seriously look at.
“When you open a shop, you sell your products at lower prices to attract customers, but once you secure them you can increase the prices knowing that they will still buy from you,” he told Bernama.
Nageeb expressed optimism that everything will be back to normal and Malaysia can continue to have good trade with India.
According to a source, Malaysia’s exports to India were worth US$10.8 billion in the fiscal year ended March 31, while imports totalled US$6.4 billion.
The South Asian country has been Malaysia’s biggest palm oil buyer since 2014 (replacing China), and for the first nine months of 2019, it made up 28 per cent of total palm oil exports.
Thanks to the preferential import duty on Malaysian refined palm oil (for the first nine months), there was a significant rise in India’s market share from 28.7 per cent to 57.8 per cent.
Minister of Primary Industries Teresa Kok has said that the country is exploring the possibility of sourcing raw sugar from India starting next year to enhance bilateral trade with India.
Additionally, Malaysia is also looking into importing more buffalo meat from India to meet the increasing local demand.
Asked about the Indian food ministry’s proposal to increase the integrated GST (IGST) on imported refined palm oil to 12 per cent from January next year, Nageeb said that could happen as the government is under pressure from local refiners.
“The IGST is possible (for implementation) .. now people prefer to buy refined oil so their refiners do not have enough business and this will affect our market.
“At the end of the day, palm oil prices are dictated by supply and demand, so if this happens of course prices will be impacted and the smallholders will be impacted.
“But at the same time, palm oil has many uses, so we have always had alternatives,” he added.
Nageeb noted that there are some positive signs of palm oil prices moving up due to the lower stock level in the world’s two largest producers – Indonesia and Malaysia.
Less fertiliser used in plantation areas as well as the haze problem have resulted in low yields, with demand continuing to grow, he noted.
“So looking at the current scenario, I believe the price should stabilise at RM2,300 to RM2,500 per tonne next year, which is reasonable for the smallholders,” he concluded.
MPOA is tasked with the important function of balancing the needs and interests of the various sectors for synergy and development of the plantation industry as a whole.
It also serves the interests of other plantation crops such as rubber, cocoa and tea as well as non-crop issues relating to land, labour, trade and pricing.