KUALA LUMPUR: India's restrictions on imports of refined palm oil will lead to a loss of market share for Malaysia and spark a price war with rival supplier, Indonesia, a Malaysian industry association said on Thursday.

India, the world's biggest edible oil buyer, issued a notification on Wednesday amending imports of refined palm oil to "restricted", a move that industry sources said amounted to an effective ban.

The move was seen as punishing Malaysia, India's main supplier of refined palm oil, for criticism of its policies by Tun Dr Mahathir Mohamad, the 94-year-old outspoken prime minister of Muslim-majority Malaysia. Indonesia is the world's biggest exporter of crude palm oil.

The Palm Oil Refiners Association of Malaysia (PORAM) said the move meant Malaysia would now have to compete on crude palm sales to India, where Indonesia has traditionally been more cost competitive.

"This puts Indonesia and Malaysia at loggerheads. There will be a price war between Indonesia and Malaysia, and we are at the losing end," said PORAM Chairman Jamil Haron told Reuters.

"We can still sell crude palm oil, but now we need to compete with Indonesia."

Haron said the restrictions on refined palm oil could be in the form of quotas and more regulations.

Malaysia last year overtook Indonesia as India's biggest palm oil supplier after it won a lower duty for refined palm oil imports.

The Southeast Asian neighbours account for 85% of the global palm oil production. Palm oil is Malaysia's biggest agricultural export, accounting for 2.8% of its gross domestic product and 4.5% of total exports.

A Kuala Lumpur-based trader, who did not want to be named citing company policy, said Malaysia's exports would start falling from end-January after current contracts end.

Malaysia exported an estimated 3.9 million tonnes of palm oil to India in 2019. Of this 2.04 million tonnes was palmolein which is used as a cooking agent, according to Refinitiv data.

PORAM members include top industry players including Sime Darby Plantation, Cargill Palm Products, FGV Refineries, IOI Edible Oils and Wilmar Edible Oils.

Malaysian Palm Oil Association Chief Executive Datuk Nageeb Wahab said the curbs on refined palm oil exports would benefit Indian refiners.

Dr Mahathir said in October India "invaded and occupied" Kashmir, a disputed mainly Muslim region also claimed by Pakistan. Last month, he said India was stoking unrest with its new religion-based citizenship law that excludes Muslims. 

 - Reuters