Edible oil crisis deepens in Sri Lanka
Sri Lanka is grappling with a deepening crisis in the coconut and palm oil industry, triggered by a severe shortage of coconuts and soaring global palm oil prices.
A ban on oil palm cultivation as a substitute crop, along with a restriction on oil palm imports, is threatening the industry, potentially leading to a halt in domestic coconut production within the next 3-4 years. The government’s position is still uncertain, with no clear indication of when the ban may be lifted.
Without altering current import duties, the government could allow the import of alternative products such as palm oil, palm olein and similar substitutes while granting farmers’ limited permission to grow oil palm on unused or barren land, several leading palm oil industrialists said.
Also approve new palm oil plantations for companies willing to export their products as a solution to tackle this problem, one official said adding that it is essential to support the rehabilitation of at least five out of the 10 closed factories to resume export-oriented production.
Sena Suriyapperuma, economic and financial analyst and industry expert, suggested promoting palm cultivation partnerships between refining companies and smallholder farmers, increasing rural income.
As the nation struggles to meet domestic demand, essential foreign exchange continues to drain the economy, he pointed out.
The annual consumption of coconut oil in Sri Lanka is high at 240,000 metric tonnes while only 40,000 metric tonnes are locally produced.
Reduced duties on coconut oil imports are costing Sri Lanka valuable foreign exchange. For instance, in December 2024, the global CIF (Cost, Insurance, and Freight) price of a metric tonne of palm oil stood at US$1,220. As of now, that price has more than doubled to $2,680 per tonne.
Sri Lanka imports approximately 120,000 metric tonnes of palm oil annually with the country losing around $1,530 per tonne in foreign exchange. Can the country continue to bear such a loss?, Mr. Suriyapperuma asked.
President of Palm Oil Industry Association of Sri Lanka Dr. Rohan Fernando said the government needs to lift the ban as scientific evidence suggest that oil palm is the most efficient vegetable edible oil.
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