India’s top vegetable oil trade body has asked its members to stop buying palm oil from Malaysia, an unprecedented call aimed at helping New Delhi punish the country for criticising India over its policy toward Kashmir.
The directive by the Solvent Extractors’ Association of India (SEAI) shows how nationalist sentiments can affect international business, and is a big blow to Malaysia, the world’s second largest producer and exporter of palm oil after Indonesia.
India was Malaysia’s third-largest export destination in 2018 for palm oil and palm-based products worth 6.84 billion ringgit ($1.63 billion). Vegetable oil contributed 2.8% of Malaysia’s gross domestic product last year and 4.5% to total exports.
Malaysia’s exports to India were worth $10.8 billion in the fiscal year that ended on March 31, while imports totalled $6.4 billion, according to Indian government data.
Malaysian palm oil futures slipped on Tuesday over concerns demand would fall from India.
“Our government has not taken kindly to the unprovoked pronouncements by the Malaysian prime minister and is contemplating some retaliatory action,” SEAI president Atul Chaturvedi said in a statement carrying a note to its members.
“It would be in fitness of things, as responsible Indian vegetable oil industry, we avoid purchasing of palm oil from Malaysia till such time clarity on the way forward emerges from Indian government.”
He said the guidance was issued in its own interest as well as a mark of solidarity with the country.
India has so far refused to comment on the trade spat.
India’s government has rebuked Malaysia for its stance on Kashmir but has not commented on any trade measures. India’s trade ministry declined to comment.
Malaysia said last week it was considering raising imports of raw sugar and buffalo meat from India, in a bid to ease the trade tensions.
Malaysian state news agency quoted the chief of the Malaysian Palm Oil Association as saying that curbing purchases from the country would hurt India, too.
But the SEAI said there was no dearth of options.
“This rare advisory we issued considering rising tensions between Malaysia and India,” SEAI executive director BV Mehta told Reuters. “There are many alternatives to Malaysian supplies that our refiners can easily tap.”
However, Malaysian PM Mahathir said on Tuesday he would not retract his criticism of New Delhi’s actions in Kashmir despite Indian traders calling for an unprecedented boycott of Malaysian palm oil.
Mahathir said Malaysia would study the impact of the boycott called by the Mumbai-based SEAI’s and look at ways to address the issue.