With 60 lakh tonnes import, India may be the world’s single largest importer of crude palm oil (CPO), but most suppliers at the origin — Indonesia and Malaysia — refuse to respect the dictum ‘customer is king’.
Especially in recent months, a significant part of crude palm oil dispatched to India and cleared through various ports on the east and the west coast is suspected to be actually sub-standard with high peroxide value and poor bleaching quality.
Quality falling below normal acceptable standards is the result of storage of the liquid oil over long periods of time which leads to oxidation.
With crude palm oil exports trailing production, inventory at the production centres has been burgeoning for the last several months.
Conditions of storage as well as length of the storage period impact peroxide value of the oil.
According to oil technologists, higher peroxide value results in rancidity.
We may have often noticed coconut oil turning rancid when stored for a length of time. Palm oil is no different.
There is also the issue with free fatty acid (FFA). The maximum FFA limit specified is five per cent.
However, if FFA in CPO is found to be over five per cent, the supplier blends a certain volume of refined palm oil with CPO so as to bring the FFA level down to the acceptable limit.
This seems to have become a normal trade practice.
A number of small and not so small importers have confided that there indeed is a problem with the quality of imported crude palm oil.
They rued that any complaint with the supplier was shot down with a standard reply saying there was no contractual specification for peroxide value or bleachability index, known as DOBI value.
So, small importers are forced to accept low quality consignment without any legal recourse. Sub-standard oil raises the cost of refining and forces refiners here to compromise on quality. This goes against consumer interest.
The question is whether overseas suppliers thrust sub-standard palm oil on India or whether Indian importers are a willing accomplice in this sordid game of poor quality palm oil supplies at a time when stocks overseas are exploding and prices sliding down rapidly. It could be both, as some argue.
Unfortunately, India’s industry and trade associations that are often vocal in demanding tariff and duty protection fail to remedy the genuine issues confronting the import trade.
A corporate executive mentioned that the big boys engaged in palm oil import must surely be aware of the quality issue; but have remained indifferent for reasons best known to them.
On the other hand, another large Asian importer China has already tightened the quality norms for imported foods including palm oil.
In China, imported cargoes that do not meet the specified stringent quality standards will be rejected at the port of entry itself. This has not just upset but actually unnerved Malaysian and Indonesian suppliers who scurry to meet the stringent Chinese stipulations.
As a nation, India seems to be not bothered at all about the quality of imported foods. We spend as much as $6 billion (over Rs 30,000 crore) for importing palm oil whose quality we don’t care much about.
Unfortunately, in our country, liberalisation is interpreted as a licence to do whatever one wants.
Quality specifications for imported crude palm oil deserve to be reviewed and tightened immediately.
Also, it is necessary to tighten border control measures. Indian Customs authorities and port health organisations should ensure that the consumers are not short-changed.
The Union Ministries of Food, Health and Commerce must move in quickly together to tighten quality norms and put supplier countries on notice.
Import contract terms must be amended to protect Indian interest.