India has resumed purchasing Malaysian palm oil following a four-month gap sparked by a diplomatic row over the former Malaysian government administration’s comments on the Jammu-Kashmir issue.
Reuters, quoting trade sources, said the buying was spurred by a fall in domestic inventories and discounted prices.
Malaysia, the world’s second-largest palm oil producer after Indonesia, will be shipping out 200,000 tonnes of crude palm oil to leading Indian importers in June and July, said the report.
The purchases come in the wake of warmer trade relations between the two countries after Perikatan Nasional (PN) took over Putrajaya recently.
Putrajaya also signed a deal last week to buy a record 100,000 tonnes of Indian rice.
“Port stocks have dropped sharply in India because of lower imports,” a Singapore-based trader who sells Malaysian and Indonesian palm oil was quoted as saying.
The report also stated that with the resumption of purchases, India, the world’s largest edible oil importer, could further support Malaysian palm oil prices, FCPOc3, which have gone up from 10-month lows recently.
Former Prime Minister Tun Dr Mahathir Mohamad had previously sparked controversy when he criticised India’s controversial new citizenship law, which was deemed discriminatory to its Muslim minority.
At the United Nations General Assembly last September, he said India had “invaded and occupied” Kashmir, a disputed Muslim-majority region also claimed by Pakistan.
In retaliation, India, which had been Malaysia’s largest palm oil market for the past five years, effectively ceased all purchases from Malaysia.
An Indian oil refiner was quoted in the report as saying that the renewed buying was spurred by low stocks, while India’s relations with Malaysia have been improving since a new government was formed in early March.
“I think the Indian government will allow unloading of upcoming shipments. We can’t rely on one seller (Indonesia) indefinitely, especially when you have to build inventory,” the buyer was quoted as saying.
A Mumbai-based dealer told Reuters that Malaysian palm oil is now available at a US$15 discount to supplies from Indonesia, which on Monday raised its palm oil export levy by US$5 per tonne.
Indian purchases of palm oil from Malaysia could rise further if discounts remain, he said.
India purchases more than 9 million tonnes of palm oil a year, accounting for nearly two-thirds of its total edible oil imports, and took a record 4.4 million tonnes of Malaysian palm oil in 2019.