 "Anwar Ibrahim to meet PM Modi: How palm oil has played a role in India-Malaysia ties")
Malaysia’s Prime Minister Anwar Ibrahim visit to India is shining a light on ties between the two countries.
One of the most important parts of the relationship is trade in palm oil – which used in anything from lipstick to pizza – of which Malaysia is the world’s second-largest producer and India is the world’s largest importer.
But what role has palm oil played in India-Malaysia ties?
Let’s take a closer look:
By the numbers
As per Financial Express, palm oil can be used both as an edible oil and a biofuel.
Palm oil comprises 57 per cent of India’s total vegetable oil imports.
Indonesia and Malaysia are the primary suppliers of RBD Palmolein and crude palm oil (CPO) to India.
Till July, India had imported 4.92 million tonnes of palm oil, as per NST.com.
India imported 3.3 million metric tonnes of palm oil last year – which is line with the annual average of 3 million metric tonnes.
India’s palm oil imports reached a seasonal high of 10.81 lakh tonnes in July, according to industry body Solvent Extractors Association (SEA).
The trade group said India’s palm oil imports in May rose by 11.6 per cent compared to April – the since January.
Impact Shorts
More ShortsIndia’s palm oil imports in May stood at 763,300 lakh tonnes.
The website quoted Indian Vegetable Oil Producers Association president Sudhakar Desai as saying that the country would likely import 9.01 million tonnes of palm oil for the 2023-2024 financial year.
But it wasn’t always such smooth sailing.
Bump in the road
In 2019, India was Malaysia’s biggest buyer of palm oil.
Data from the Malaysian Palm Oil Board (MPOB) showed that New Delhi purchased 4.4 million tonnes of palm oil from Kuala Lumpur.
However, then Malaysian prime minister Mahathir Mohamad caused an outcry in India when he criticised India’s actions in Kashmir and the citizenship law.
Mahathir in October 2019 at the UN General Assembly claimed that India “invaded and occupied” Kashmir.
“Despite the UN resolution on Jammu and Kashmir, the country has been invaded and occupied,” Mahathir said as per BBC.
“There may be reasons for this action but it is still wrong. The problem must be solved by peaceful means. India should work with Pakistan to resolve this problem. Ignoring the UN would lead to other forms of disregard for the UN and the rule of law,” he added.
That followed remarks he made in September 2019 accusing India of ‘stoking unrest’ with its citizenship law.
India had responded by changing its rules to curb the import of refined palm oil from Malaysia.
As per BBC, Malaysia’s palm oil exports to India shrank from 310,648 tonnes in September to 219,956 tonnes in October.
India imported just 142,696 tonnes of palm oil in November.
As per VOA, the SEA at the time had urged its members to stop buying palm oil from Malaysia because of the “unprovoked pronouncement” and “in solidarity with our nation.”
Mahathir’s media adviser, A Kadir Jasi had said that Kuala Lumpur ought to retaliate with its own boycott of Indian goods and clamping down on Indian migrants.
However, Mahathir did not follow through on the advice.
The year 2020 was even worse.
As per Drishti IAS, India’s palm oil imports from Malaysia in the first four months of 2020 fell by more than half over the same period in 2019.
Yu Leng Khor, a political economist and principal of Segi Enam Advisors, told VOA in 2020, “In the last couple of years, it is the biggest market for Malaysia, and it delivered a huge increase in volume and traded value in 2019, and this [boycott] is a big slap-down now.”
“For the first few months of 2020, Malaysian palm oil exports to India were hit pretty badly, they were only taking some 10 to 12 per cent of their normal monthly intake,” Malaysian Palm Oil Council (MPOC) CEO Datuk Dr Kalyana Sundram told FoodNavigator-Asia.
Normal trade resumes
In May 2020, India, four months after the diplomatic spat, resumed purchases of Malaysian palm oil.
By then, Mahathir had been replaced as prime minister by Muhyiddin Yasin.
MPOC data showed India bought just under 400,000 tonnes of Malaysian palm oil from January to June 2020.
That was 85 per cent less than the 2.6 million tonnes for the same period in 2019.
This came amid a worldwide collapse in demand for palm oil amid the COVID-19 lockdowns and as the Malaysia’s palm oil production surged.
Malaysia had made its palm oil available at a steep discount. Malaysia had also agreed buy 100,000 tonnes of Indian rice, as per Drishti IAS.
Experts said a change of leadership in Malaysia seemed to have done the trick.
“The primary cause of Malaysia’s altered policy towards India is the shift in leadership,” former ambassador Rajiv Bhatia, a distinguished fellow at Gateway House, told Sputnik India.
‘India-Malaysia working together’
Palm oil is a key item on the agenda of both nations during Ibrahim’s visit.
As per Financial Express, the two countries in July had vowed increase cooperation in the field of edible oil, particularly in the cultivation of oil palm and the production and trade of palm oil.
Union Minister for Agriculture Shivraj Singh Chouhan met with Malaysia’s Minister of Plantations and Commodities, Datuk Seri Johari Abdul Ghani to discuss the issue.
Desai, meanwhile, has said the two nations are working together to counter ‘anti-palm oil sentiment.’
He was likely referring to the European Union’s announced plans to phase out palm oil imports over environmental concerns.
The bloc had claimed cultivation of palm oil leads to deforestation.
As per VOA, Malaysia had challenged the EU, France and Lithuania’s decision in the World Trade Organization (WTO).
It accused the bloc of violating international trade rules.
The three-person panel voted 2:1 in favour of the EU.
However, the panel added that the way the EU organised and announced its policy was tantamount to “arbitrary or unjustifiable discrimination” against Malaysia.
“If anti-palm oil campaigns are not countered effectively in India, it could lead to a significant decline in demand, adversely affecting the palm sector,” Sudhakar was quoted as saying by NST.com.
Johari in May had warned retailers, importers and distributors in the country against selling, distributing or importing products which are tied to the boycott campaign against palm oil.
With inputs from agencies
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