Malaysia to buy more sugar from India to resolve palm oil dispute

Malaysia’s top sugar refiner said it would increase purchases of the commodity from India, which according to two sources is part of efforts to placate New Delhi amid an ongoing spat over palm oil imports.

MSM Malaysia Holdings Berhad will buy 130,000 tonnes of raw sugar from India worth about 200 million ringgit ($49.20 million) in the first quarter, the company told Reuters. It bought around 88,000 tonnes of raw sugar from India in 2019.

MSM is the sugar refining arm of the world’s largest palm oil producer, FGV Holdings, which is an unit of Malaysian state-owned Federal Land Development Authority or Felda.

The company did not cite the palm oil dispute as a reason for the increase in purchases.

But the two sources, who are familiar with discussions between the company and the government on the purchase, said it was a bid to appease India, which has been urging Malaysia to reduce the trade deficit between the countries.

India, the world’s largest edible oil buyer, this month effectively halted Malaysian palm oil imports apparently in retaliation to Malaysian Prime Minister Mahathir Mohamad’s comments criticising New Delhi over its policy.

Malaysia has said it will look to other markets to sell more palm oil but that may not be easy as India has been the biggest buyer of Malaysian palm oil for the past five years, purchasing 4.4 million tonnes in 2019.

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.

Malaysia imported a total of 1.95 million tonnes of raw sugar in 2019, according to data from the International Sugar Organisation on Refinitiv Eikon. It typically buys more from Brazil and Thailand than from India.

India is the world’s biggest sugar producer but is struggling with a surplus. Its exports are expected to rise to a record 5 million tonnes for the 2019/20 season.

MSM said it was expecting the arrival of three shipments of raw sugar from India between January and February.

“This is very good move. It will help India in increasing sugar exports,” Praful Vithalani, President of the All India Sugar Trade Association told Reuters about MSM’s move to buy more from India.

Around 50,000 tonnes of raw sugar has already been contracted by Malaysia for January shipments, said a Mumbai-based dealer with a global trading firm.

Malaysia’s trade minister is open to meeting his Indian counterpart at the World Economic Forum gathering this week, his ministry said, after New Delhi said no such encounter was possible amid a spat over palm oil supplies.

It was the second time in the last four days Malaysia expressed the possibility of such a meeting in Davos, during a standoff between a major supplier and buyer of palm oil caused by Malaysia’s criticism of Indian policies.

Malaysia’s Ministry of International Trade and Industry (MITI) reiterated that India’s trade ministry first sent a request on Dec.24 - before India placed curbs on imports of refined palm oil - for a bilateral meeting between the two ministers in Davos.

“In the spirit of economic partnership between our two nations, Malaysia has made every effort to accommodate the official request by India, but due to the busy schedule of both ministers, a mutually agreeable time has not been reached at the time of this statement,” MITI said.

“In the absence of a formal meeting, it is common for interested parties to meet informally and exchange views on the sidelines.”

It said MITI minister Darell Leiking “has expressed his openness to such discussion” with his Indian counterpart Piyush Goyal, mainly regarding India’s participation in the trade bloc Regional Comprehensive Economic Partnership.

India has been agitated by Mahathir Mohamad last month speaking out against a new citizenship law.

Malaysia is the second biggest producer and exporter of palm oil and India’s restrictions on the refined variety of the commodity imposed on Jan.8 have been seen as a retaliation for Mahathir’s words.

Mahathir, the world’s oldest premier at 94, told a small group of reporters including from Reuters that India’s new citizenship law was “grossly unfair”.

But he said his nation of 32 million people was too small to take retaliatory action against India following its palm curbs.

Since the restrictions, thousands of tonnes of refined palm oil have been delayed or got stuck at various Indian ports, multiple sources told Reuters.

Reuters