India urges boycott of Malaysian palm oil after diplomatic row

Move comes as Mahathir criticises India's actions in Kashmir and its new citizenship law

MUMBAI: Indian palm oil importers have effectively stopped all purchases from top supplier Malaysia after the government privately urged them to boycott its product following a diplomatic spat, industry and government sources said.

The warning, issued last week, comes almost in parallel with New Delhi's move to restrict imports of refined palm oil and palmolein after Malaysia's prime minister criticised India's actions in Kashmir and its new citizenship law.

Consequently, Indian importers were not buying any crude or refined palm oil from Malaysia, at least five industry sources familiar with the matter told Reuters.

"Officially, there is no ban on crude palm oil imports from Malaysia, but nobody is buying due to government's instructions," said a leading refiner, adding that buyers now import from Indonesia despite paying a premium to prices in Malaysia.

India is the world's largest importer of palm oil, buying more than 9 million tonnes annually mainly from Indonesia and Malaysia.

The move to effectively block imports from Malaysia could push up the country's palm oil inventories and put pressure on its prices, which set the global benchmark for the oil.

It could also benefit Indonesia - the world's largest exporter of crude palm oil (CPO).

"We could import CPO from Malaysia, but the government has warned 'Do not come to us if your shipments get stuck," said a Mumbai-based trader, adding "no one wants to see their shipments get stuck at ports."

India was Malaysia's biggest buyer of palm oil in 2019 with 4.4 million tonnes of purchases, Malaysian Palm Oil Board (MPOB) data showed.

In 2020, Indian purchases could fall below 1 million tonnes even if some buyers make small shipments to fulfill old orders, the trader said.

Malaysian palm oil futures extended losses on Monday after the Reuters story and closed down 1.4%.

India's government has not made any public remarks about Malaysian palm oil. The commerce ministry did not immediately respond to a request for comment on Monday.

Malaysia's Primary Industries Minister Teresa Kok, who is responsible for the palm oil industry, declined to comment.

Indian government and industry sources have told Reuters that Prime Minister Narendra Modi's Hindu nationalist government was seeking to target Malaysia after recent criticism of India by Malaysian Prime Minister Mahathir Mohamad.