May 8: The production of the domestic oil industry has fallen by a quarter since Indonesia banned the export of crude oil amid mounting tensions between Russia and Ukraine. The industrialists say that the production has shrunk due to the obstruction in the import of raw materials. 

According to the industrialists, the oil industries of Bara-Parsa are now running at 25 percent of their capacity due to the inconvenience in supply of raw materials.

Nikhil Chachan, director of Narayani Oil, said that the production has dropped to about a quarter after the import of semi-refined oil from major producers was stopped. 

“Prior to this, the industries were producing at 80 percent of their capacity. At present, their production capacity has decreased to 25/30 percent,” said Chachan. Entrepreneurs say that the production will keep declining if the problems in the supply chain prevails. 

Among the two dozen edible oil industries, the majority are in this corridor. Few others are operating in Biratnagar and Bhairahawa. 

The domestic producers used to import semi-refined sunflower and soybean oil from Ukraine and Russia before the war on February 24 halted the shipments. A high quantity of mustard oil used to be imported from these countries. However, the mounting tension between these countries for a couple of months has affected the supply chain. 

Another major exporter of palm oil, Indonesia, has banned the export since April 28 in order to control the price in the domestic market.

Suresh Rungta, operator of OBC Foods, said that the industrialists, who have been exporting edible oil to India by importing semi-refined oil from Indonesia, are finding it difficult to operate the industries at the moment. 

Rungta informed that they have started importing soybean from Australia and India after the embargo of semi-refined oil. Furthermore, he said that the stock of soybeans in the warehouse is not enough even for a month. Currently, his industry has been consuming 80 metric tons of soybean per day. 

The inconvenience in supply of raw materials can lead to the scarcity of oil in the domestic market. The industrialists say that the price of oil is skyrocketing due to the decline in production. According to Chachan, the price of semi-refined soybean oil in the international market which was USD 1,000 per metric ton a year ago, has now increased to USD 2,100.  

The shortage in the international market and the pressure of inflation have impacted the domestic market price. The price of edible oil has risen by Rs 50 per liter since the Russia-Ukraine tensions started. According to Rungta, the price of cooking oil, which was Rs 250 per liter two months ago, is now Rs 300 per liter.