By: Staff Writer
May 25, Colombo (LNW): Sri Lanka is grappling with a deepening crisis in the coconut and palm oil industry, triggered by a severe shortage of coconuts and soaring global palm oil prices sky rocketing edible oil prices.
A complete ban on oil palm cultivation as a substitute crop, along with a restriction on oil palm imports, is threatening the industry, potentially leading to a halt in domestic production within the next 3-4 years. The government’s position is still uncertain, with no clear indication of when the ban may be lifted.
Without altering current import duties, the government could allow the import of alternative products such as palm oil, palm olein, and similar substitutes while granting farmers’ limited permission to grow oil palm on unused or barren land, several leading palm oil industrialists said.
It also has to only approve new palm oil plantations for companies willing to export their products as a solution to tackle this problem he said adding that it is essential to support the rehabilitation of at least 5 out of the 10 closed factories to resume export-oriented production.
Sena Suriyapperuma economic and financial analyst and industry expert suggested to promote palm cultivation partnerships between refining companies and smallholder farmers, increasing rural income.
As the nation struggles to meet domestic demand, essential foreign exchange continues to drain from the economy, he pointed out.
The annual consumption of coconut oil in Sri Lanka is high, at 240,000 metric tons while, only 40,000 metric tons are locally produced.
In the present, reduced duties on coconut oil imports are costing Sri Lanka valuable foreign exchange.
For instance, in December 2024, the global CIF (Cost, Insurance, and Freight) price of a metric ton of palm oil stood at US$ 1,220. As of now, that price has nearly doubled to $2,680 per ton.
Even with basic calculations, it becomes clear that Sri Lanka imports approximately 120,000 metric tons of palm oil annually.
This results in a significant outflow of foreign exchange, with the country losing around $1,530 per ton. That adds up to $ 153 million leaving the economy each year. The million dollar question is whether the country can continue to bear such a loss, Mr Suriyapperuma asked.
Oil palm’s productivity is nearly four times that of coconut oil, and increasing coconut oil production would require more time and land, making oil palm a more efficient solution for both local supply and foreign exchange earnings, he revealed.
President of Palm Oil Industry Association of Sri Lanka (POIASL) Dr. Rohan Fernando has renewed its clarion call for the Government to lift the ban on oil palm cultivation, insisting on its significant economic, environmental and strategic benefits).
The present regime is yet to take a decision on lifting the ban, despite the scientific evidence that oil palm is the most efficient vegetable edible oil and that more than 40 percent of the world demand is met by this golden crop, he pointed out.
