Raw material ban drains Sri Lanka’s palm oil-based product earnings
Sri Lanka would incur a potential loss of around US$ 40 million due to the ban on the importation of crude palm oil (CPO), which is used in the production of bakery fats and margarine for export mainly to Indian market, companies operating under the Board of Investment (BOI) reiterated.
The CPO imports were banned during the 2021/2022 period under a policy decision taken by the administration of President Gotabaya Rajapaksa. The related gazette notification also restricted the issuance of import and export licenses for the commodity.
Additionally, the importation of palm-related raw materials such as crude palm olein (CPOL), palm stearin, and crude palm kernel oil has been brought under a licencing system.
Companies operating under the BOI, which manufacture goods for export to India, are now required to obtain special bulk shipment import licences for their raw materials. These companies have described this as a highly unfortunate situation.
Sri Lanka enjoys a 27 per cent cost advantage compared to other countries when exporting bakery fats and hydrogenated fats (vanaspati ghee) to India under the Indo-Sri Lanka Bilateral Trade Agreement.
Although palm oil imports were banned in 2022, the recent reduction of import tariffs in India over the past quarter presented a major opportunity for Sri Lankan companies. However, with India increasing its import tariffs by 32 per cent from April 2025, the competitive edge for Sri Lankan products has worsened.
The Indian government has allocated a quota of 250,000 metric tonnes to Sri Lanka, under which the Sri Lankan companies estimate they need to import at least 6,000 metric tonnes of palm oil monthly to meet production targets.
Unfortunately, even BOI-registered companies are barred from importing crude palm oil due to the gazette notification.
Amid Sri Lanka’s ongoing severe foreign exchange crisis, the government has yet to implement any positive or effective measures to facilitate the importation of essential raw materials without disruptions.
Despite the BOI granting approvals for import licences, companies have been forced to turn away already imported palm oil shipments at the port, unable to offload them due to the ban.
Manufacturers have also pointed out to the government that without this critical raw material, their overall production volume of value-added goods could drop by 25 per cent, while the value of primary products relying on the banned raw material may decline by as much as 75 per cent.
They claim that there is a complete lack of awareness or understanding of this issue among present government officials.
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