Buyers told to stop Malaysia palm oil amid Kashmir standoff

NEW DELHI, Oct 21 (Reuters): India's top vegetable oil trade body on Monday asked its members to stop buying palm oil from Malaysia.

The directive by the Solvent Extractors' Association of India (SEAI) shows how nationalist sentiments can impact international business, and is a big blow to Malaysia, the world's second largest producer and exporter of palm oil after Indonesia.

India was Malaysia's third-largest export destination in 2018 for palm oil and palm-based products worth 6.84 billion ringgit ($1.63 billion). Vegetable oil contributed 2.8% of Malaysia's gross domestic product last year and 4.5% to total exports.

"Our government has not taken kindly to the unprovoked pronouncements by the Malaysian prime minister and is contemplating some retaliatory action," SEAI President Atul Chaturvedi said in a statement carrying a note to its members.

"It would be in fitness of things, as responsible Indian vegetable oil industry, we avoid purchasing of palm oil from Malaysia till such time clarity on the way forward emerges from Indian government."

He said the guidance was issued in its own interest as well as a mark of solidarity with the country.

Reuters reported that India was considering curbing imports of some products from Malaysia, including palm oil, after Prime Minister Mahathir Mohamad said last month that India had "invaded and occupied" Kashmir, a disputed Muslim-majority region also claimed by Pakistan.

India stripped its portion of the Kashmir valley of statehood and autonomy on August 05.

Some Indian traders said refiners had already stopped buying Malaysian palm oil for shipment in November and December, fearing higher import taxes or other measures. In any case, household palm oil consumption falls in India during winter as the tropical oil solidifies at lower temperature.