Palm Oil Industry In Sri Lanka: An Economic Analysis
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Date
2023
Journal Title
Journal ISSN
Volume Title
Publisher
Institute Of Policy Studies of Sri Lanka
Abstract
Palm oil is the main edible oil source consumed
in the world. Sri Lanka began importing palm oil a
few decades back mainly due to the increasing
local demand driven by population and income
growth, changes in food habits and developments
in food and related industries. Considering the
rising demand for imported palm oil and the
potential suitability of climatic and soil factors in
the country, oil palm was allowed to be cultivated
on 20,000 hectares (ha) as part of a strategy to
promote import substitution. Hence, regional
plantation companies (RPCs) were permitted to
cultivate oil palm in marginal rubber lands in
selected districts. However, oil palm cultivation
and consumption are globally criticised for its
environmental and health impacts regardless of
rewarding factors such as low cost and versatility
in food and many other industries. Sri Lanka also
paid attention to possible environmental hazards
and health impacts of consuming palm oil as well
as resistance from local environmental activists.
As a result, oil palm cultivation was banned and
a phase out within 10 years was proposed as a
policy decision. Subsequently, the country took
measures to restrict the importation of palm oil,
considering its health hazards. Yet, alternatives
to satisfy the local demand are limited. Hence,
the decision was revised to keep the market open
under licences. However, the industry investors
claim that the criticism is unreasonable.
Therefore, this study explores the economic
aspects of the industry, such as costs and
returns, contribution to the economy, tariff
protection, market linkages etc., including potential
environmental and social issues in the palm oil
industry value chain in Sri Lanka.