Malaysia's Mahathir rules out trade action over India palm oil boycott

A worker unloads oil palm fruits from a lorry at a palm oil factory in Malaysia on Aug 4, 2014. PHOTO: REUTERS

LANGKAWI (REUTERS) - Malaysia will not take retaliatory trade action against India over its boycott of palm oil amid a political row between the two countries, Prime Minister Mahathir Mohamad said on Monday (Jan 20).

India, the world's largest edible oil buyer, this month effectively halted imports from its largest supplier and the world's second-biggest producer in response to comments from Tun Dr Mahathir attacking India's domestic policies.

"We are too small to take retaliatory action," Dr Mahathir told reporters in Langkawi, a resort island off the western coast of Malaysia. "We have to find ways and means to overcome that," he added.

The 94-year-old premier of Muslim-majority Malaysia had criticised New Delhi's new religion-based citizenship law and also accused India of invading the disputed region of Kashmir.

Dr Mahathir again criticised India's citizenship law on Monday, saying he believed it was "grossly unfair".

India has been Malaysia's largest palm oil market for the past five years, presenting the South-east Asian country with a major challenge in finding new buyers for its palm oil.

Benchmark Malaysian palm futures fell nearly 10 per cent last week, their biggest weekly decline in more than 11 years.

Meanwhile, multiple sources told Reuters that thousands of tonnes of refined palm oil are delayed or stuck at various Indian ports.

"More than 30,000 tonnes have been stuck at various (Indian) ports. All theses vessels were loaded before the government restricted imports of refined palm oil," said a Mumbai-based vegetable oil dealer, who declined to be named citing company policy.

"Usually customs officials allow unloading of commodities that are in transit before any change in regulation. But in the case of refined palm oil, there is some confusion and that is leading to delays."

A source in New Delhi with direct knowledge of the matter said the restrictions mean importers will need a licence to buy, a tool that could be used to deny or delay shipments from Malaysia. The person declined to be identified citing the sensitivity of the matter.

Another vegetable oil importer said some vessels were stuck at Kolkata port in eastern India, with some others on the west coast.

In one incident at Mangalore port on the west coast, crude palm oil was unloaded from a vessel, while refined oil was not permitted ashore, said the importer, who also declined to be named citing the sensitive nature of the situation.

Reuters could not ascertain which vessels contained the cargoes that have been held up at Kolkata and Mangalore, nor who the buyers were.

A source in Kuala Lumpur, who requested anonymity citing the sensitivity of the matter, said the refined palm oil was from both Indonesia and Malaysia.

Officials at Kolkata and Mangalore ports did not immediately respond to an email seeking comment.

Malaysia's Sime Darby Plantation, the world's largest oil palm planter by land size, said none of its refined palm oil was stuck at Indian ports.

The company, which has operations in both Malaysia and Indonesia, exported more than 436,000 tonnes of refined palm oil to India last year.

Mr Sudhakar Desai, president of Indian Vegetable Oil Producers'Association, said refined palm cargoes that reached before the restrictions were placed had been cleared but none after that."We don't think any licenses have been issued for any origin," Mr Desai said.

New Delhi is also unhappy with Malaysia's refusal to revoke permanent resident status for controversial Indian Islamic preacher Zakir Naik, who has lived in Malaysia for about three years and faces charges of money laundering and hate speech in India.

Dr Mahathir said even if the Indian government guarantees a fair trial, Naik faces the real threat of vigilante action and that Malaysia will relocate the preacher only if it can find a third country where he would be safe.

"If we can find a place for him, we will send him out."

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