Country could save USD 60 Mn if permission given to replant palm oil-POIASL
Palm Oil Industry Association of Sri Lanka (POIASL) says that if permission is given to replant palm oil cultivation they can firstly reduce the annual palm oil import bill of around USD 60 million and also look at exports in the future.
POIASL members who spoke to the media said that in addition by increasing local Palm oil production in Sri Lanka it can subsidize the use of coconut oil which can be exporters in value added form and bring more foreign exchange to the country.
They said that Indonesia and Philippines are some of the highest Palm oil exporting countries and India knowing its financial viability has launched an aggressive campaign to grow Palm oil. In terms of economics, oil palm is the most economically viable crop in Sri Lanka, with the highest return on investment per hectare when compared to other crops. The current annual edible oil requirement in Sri Lanka is 264 MT. Currently, only 15-20% of this requirement is produced and the rest is imported.
Palm oil is used by a plethora of industries, including the entire food and cosmetics industries and is comparatively a safer and cheaper option when compared to other sources of vegetable oil. The association also recalled that several plantation companies started growing palm oil nurseries in 2019 on the recommendation of the then government investing around Rs. 500 million (now equivalent to almost Rs. One billion) to import seeds and plant them in nurseries.
“However after the change of government without any technical elevation the previous government banned Palm Oil plantations and all efforts to reverse the decision failed. Our requests to allow the nursery plants to be planted were also denied without considering any scientific advice.”
The POIASL members said that they had no alternative other than to destroy the nurseries and expected a financial loss of around Rs. 700 million with maintenance cost for the nurseries as well. Pressure groups against palm oil cultivation say that by growing this plantation there would be a depletion of groundwater resources and similar environmental issues. “Oil palm cultivation in the Galle District commenced about 50 years ago. However, there have been no reports to date of water shortages due to Oil palm.”
“The effect of oil palm isn’t significantly different from that of rubber. A hectare of rubber requires 31,500 litres of water per day while a hectare of oil palm requires 34,680 litres.”
“Moreover, given that oil palm is only cultivated in regions where annual rainfall averages 3,500 mm, and the crop’s water requirement is 1,300 mm per annum, there is no basis for the concern that oil palm cultivation can lead to a deficit in water resources.” Asked if oil palm plantations would result in a decrease in the cultivation of traditional crops such as rubber they said that the government has formulated strict guidelines for the palm oil industry.
“These guidelines stipulate that up to 20,000 hectares of land may be cultivated with oil palm. This area is less than 3% of the total land extent under plantation crops. We have 202,000 hectares of land under tea, 136,000 under rubber and 440,000 under coconut. Furthermore, the solid waste from palm oil manufacturing factories is used as organic manure and as fuel to generate renewable energy.”
Also oil palm does require fertilizer and even a SME grower could earn a huge amount of money as it has limited maintenance. With current market prices, the profit is around Rs. 1,000,000, Rs. 245,000, Rs. 75,000 and Rs. 45,000 for oil palm, coconut, tea and rubber respectively. Furthermore, a worker in an oil palm plantation earns an average of Rs. 65,000 per month compared to around Rs. 30,000 to Rs.35,000 in tea and rubber plantations. Oil palm is by far Sri Lanka’s most profitable crop.”
When compared with Sri Lanka’s other plantation crops, oil palm has easily the lowest cost of production (COP) at just Rs 15 per kilogram of fresh fruit bunches, with a net sale average (NSA) of Rs. 45 per kg. Coconut has a NSA and a COP of Rs. 35 and Rs. 15 per nut respectively.
Also tests have proved that there is no Soil erosion and landslides due to this cultivation. As Palm oil is obtained from the ripened fruit of the oil palm tree it helps to reduce the risk of heart diseases and low-density lipoprotein (LDL) cholesterol. Oil palm also has the potential to create wealth with strong value chains and the ability to uplift communities from poverty. The cost of cultivating one hectare of oil palm is approximately Rs.1.5 million, excluding its profitability. Plantation and Milling sectors have over Rs 12 billion contribution to Sri Lanka’s GDP through direct and indirect avenues. Further, there are two oil palm mills in Sri Lanka, each valued at Rs. 3 billion and the cost of replacing these 2 mills will be significant.
The palm oil industry generates a high level of income for the workers employed, positively contributing to the micro-economic development of the communities involved. In total, Sri Lanka imported 230,000 MT of oils and fats in 2017, at a cost of Rs 29 billion for consumption as well as for industrial and other purposes. Locally produced palm oil can therefore play a significant role in import substitution.