By: Staff Writer
November 28, Colombo (LNW):The Sri Lankan government is set to implement immediate measures to stabilize coconut and coconut oil prices, which have soared due to supply shortages and high domestic demand, according to the Agriculture Ministry. A senior official highlighted the urgency, noting the ongoing challenge of meeting local coconut demand.
Sri Lanka’s coconut oil consumption, currently 34,000 metric tons annually, is projected to reach 40,600 metric tons by 2026, growing at an average rate of 2.9% per year since 2017.
Despite being the 10th largest consumer globally in 2021, Sri Lanka faces rising costs in the global edible oil market, driven by climate issues and international demand. Refined coconut oil prices have risen from $1,320 to $1,880 per ton, with palm oil nearing $1,250 per ton.
Locally, wholesale coconut oil prices have jumped from Rs. 630 to Rs. 700 per kilogram, with retail prices reaching Rs. 1,350 per liter. These increases have forced the market to turn to cheaper imported oils. Meanwhile, the ongoing Russia-Ukraine conflict has reduced sunflower oil prices, benefiting India but leaving Sri Lanka grappling with higher coconut oil costs.
In response, the government is considering easing palm oil import restrictions, introduced in 2022, to reduce the financial burden. Currently, coconut oil imports cost Sri Lanka approximately $3.5 million monthly, a figure that could be cut by $50 million annually if restrictions are lifted. Local refiners favor crude palm oil imports, while distributors prefer refined varieties. Meeting demand through imports could stabilize coconut oil prices and boost government revenue under the existing tariff structure.
The edible oil market also faces hurdles from rising freight costs and regulatory inefficiencies. Freight charges have surged due to the U.S.-China trade conflict, leading importers to rely on smaller vessels. Customs delays and stockpiling by importers have further complicated the situation.
Sri Lanka consumes 10,000 metric tons of edible oil monthly, but local production has halved to just 4,000–5,000 metric tons due to economic challenges and reduced purchasing power. Of the 240,000 metric tons of coconut oil consumed annually, only 40,000 tons are locally produced, with the rest supplemented by substitutes.
Over 90% of Sri Lanka’s food processing companies depend on palm oil, which is also found in over 60% of supermarket products. Emeritus Prof. Asoka Nugawela of Wayamba University suggests that palm oil cultivation is economically viable, with minimal evidence linking it to deforestation.
Prompt action is needed to address the price hikes, secure imports, and support the struggling local oil industry.
