Crucial meeting today to resolve palm oil crisis

• Industry cries foul over delay in issuing of special licenses to continue biz
• LCMA says 5 members applied for special licence to import palm olein
• Bakery owners to source raw material from major importers
• Stakeholders warn on shortage of oil within next couple of weeks

By Charumini de Silva

Government will hold a crucial discussion today with industry stakeholders to resolve the palm oil crisis which has threatened the continuity of income and jobs of thousands as well as pushing costs up due to scarcity.  

Given the urgency and wide impact, representatives from the confectionery, bakery as well as top officials of trade and related institutions will attend today’s meeting which will be the second engagement since last week.

On Friday, the industry stakeholders including confectionery and bakery manufacturers, food processors, refiners, traditional coconut mill owners, coconut growers and importers had a meeting with the Trade Minister, Plantation Minister, State Minister of Co-operative Services, Marketing Development and Consumer Protection, and State Minister of Coconut, Kithul and Palmyrah Cultivation Promotion and Related Industrial Product Manufacturing and Export Diversification along with top officials of the Finance Ministry, Sri Lanka Standards Institute (SLSI) and Sri Lanka Customs.  

Although the Government has assured to issue the special license to import ‘RPD palm olein’ for bakery, confectionery and food processing industries from yesterday, stakeholders lamented there has been no satisfactory progress.

Lanka Confectionery Manufacturers Association (LCMA) and All Ceylon Bakery Owners Association (ACBOA) welcomed the Government decision to issue a special license to resolve the national crisis but insisted it was more critical to come up with a prudent mechanism to ensure continuity of business operations without any future hiccoughs. The entire industry is worth around Rs. 150 billion. 

“We are thankful for the decision taken by the Government to issue a special license to import RPD palm olein required for the food manufacturing industries. It is of a great concession for us given the dire requirement in the market at present,” LCMA President S.M.D. Suriyakumara told the Daily FT.

Daily FT learns that one of the leading confectionery manufacturers and an exporter had submitted the special license last Friday to import RPD palm olein, but the license has not been issued by authorities, while the other top firm has also applied for the same yesterday.

Denying to disclose company names, LCMA President said that around five members have already applied for the license and assured the quality of the imports will always be up to SLSI standards.

The stakeholders are now required to apply for the special import license via a request to the Import and Export Controller along with documents on business registration, business relation, required quantity and so forth. Following the submission, the assessment will be made and the issuance of license is processed within a couple of days.

According to LCMA, the formal local manufacturing industry is worth Rs. 85 billion and with the SMEs, the sector’s value is around Rs. 95 to 100 billion. Separately Sri Lanka exports $ 150-200 million (between Rs. 30 and Rs. 40 billion).

However, the ACBOA Treasurer Mahinda Ranasinghe said they have informed the Treasury and other authorities that their members cannot import directly but will source their requirement from major oil import companies.

It was noted that the bakery industry is heavily dependent on the edible oils, specialty fats and margarine importers and refiners – Pyramid Wilmar Ltd., NMK Holdings Ltd. and Sena Mills Refineries Ltd.

“Confectionery industry players are large enough to import their required raw materials, but we don’t have the financial ability or the facilities to do so,” Ranasinghe said.

Around 1.5 million people are engaged in the bakery industry, where 500,000 are directly employed and another one million engaged indirectly.

Stakeholders said the Government has not imposed any limitation on the quantity to import RPD palm olein.

They also pointed out that a mechanism is still not found to cater to the SME sector which values around Rs. 10-15 billion per annum.

“It was agreed by all present to find a proper mechanism to import and distribute the RPD palm olein requirement. The SMEs find it difficult with less facilities and storage capacities given the oil shortage experiencing in the market,” he added.

The monthly requirement of RPD palm olein for the confectionery industry is around 30,000 metric tons (MTs) of, while the bakery industry requires around 2,500 MTs subject to demand.

President Gotabaya Rajapaksa on 5 April instructed that the import of palm oil be banned with immediate effect. Thereafter, Trade Minister Bandula Gunawardena on 7 April told Parliament that if anyone wishes to import palm oil, they can submit an appeal to the Finance Ministry Secretary on the matter.

On 9 April, President Rajapaksa clarified that standard varieties of palm oil used in bakery, confectionery and food processing industries would not be prohibited. The President’s Media Unit (PMD) issuing a statement said that there is no prohibition to the importation of the ‘palm stearin’ variety for use in the production of relevant food items.

Stakeholders have warned authorities that the country would face a shortage of both palm oil and coconut oil required for the industries within the next couple of weeks.

Prices of some confectionery products have increased in the market but Suriyakumara said it was not due to an import ban on palm oil, but a reflection of dollar appreciation and its ripple effect on all imported raw materials, increased prices in limited stocks of raw materials, packaging materials and freight charges.