24/03/2008 (Commodity Online), Mumbai - Tale of two countries – both fighting to contain inflation and poverty - has a common ground. India burdened by high import bills while Indonesia is poverty struck by excess exports. But people who directly absorb the impact of these actions have little knowledge as to what makes them suffer.

But take the case of Indian housewives who can boast of throwing many economies around the world to top gear or out of the ground. The edible oil they consume, the flour they use makes or breaks many companies in Malaysia, Indonesia, Australia and many countries. And these housewives do not even know their impact.

The impact is created directly by the Indian government, which decides on import of commodities. The season has come for the government to decide on various factors including import decisions. It was not a knee-jerk reaction that the government reduced import duty on crude palm oil to 20 percent from 45 percent and 27.5 percent from 52.5 percent on refined palm oil primarily to fight inflation.

Very few have noticed that the government has not put in any order for Sunflower oil this time which sells at an all time high in global market. Instead, it is shopping for oils which it can afford.

And now with an incentive in importing palm oil, even soy oil will face the same situation as sunflower is facing. Indian kitchens will have to limit with more palmolein this year. India had planned more than 9 lakh tonnes of soy oil import which may now be only on paper. This means good news for CPO related companies whose stocks is likely to rise this week. Already Malaysian crude palm oil futures rose 5.3 percent on in one day.

The worry for India is whether the demand can match supply as palm oil is not only used as edible cooking oil, but a large quantity is diverted as bio-fuels.

India remains the largest importer of edible oil – especially palm – and that too from Malaysia and Indonesia in particular. India uses not less than 11 million tonnes of edible oils each year, more than half of which is imported. Being the largest producer of edible oil in the world has not helped the country of one billion from being the largest importer as well.

It is the same irony that a country like Indonesia faces. It is the world's largest exporter of crude palm oil (CPO), with whopping shipments of 12.4 million metric tons in 2007, an increase of more than 50% in three years. However, there is severe shortage of cooking oil in Indonesia with protests from poor forcing the government to act.

Contrary to what India does – reducing the import duty - Indonesia's government raised export tariffs on crude palm oil to 15% from 6.5% to address the growing domestic demand.