Need To Lift Ban On Oil Palm Cultivations

Former Finance Minister Ravi Karunanayake is reported to have assured hard-pressed oil palm cultivators in Matugama that he would persuade the government to lift the ban on oil palm cultivations in January 2024. The cultivators had told him that they could rake in an annual profit of Rs. 75,000 per hectare if full-scale cultivation was allowed.

Palm oil imports and the local cultivation of oil palm were banned in April 2021 by then President Gotabaya Rajapaksa citing a Central Environment Authority’s report of 2018 which said that the cultivation of the crop harms the environment greatly.Cultivation was to be phased out over 10 years. However, in response to strong appeals by confectioners, for whom palm oil is essential, licensed imports were allowed in the same year.

But this was no consolation to the companies which had invested in palm oil, confectioners who needed the product, and the general public who consumed the oil in a substantial quantity. 
Given the present acute foreign exchange shortage and the high cost of imports, thoughts have naturally turned to making a case for the resumption of oil palm cultivation and processing, but strictly under conditions, keeping in mind the environment and the health of consumers.  

Place of Palm Oil

Palm oil is the main edible oil in the world with a market share of 36.6% in 2021. Indonesia (57%) and Malaysia (27%) are the main producers. Palm oil is not only used as cooking oil but also in the manufacturing of bakery products and confectionaries, especially chocolates. 
According to a study titled: Palm Oil Industry in Sri Lanka: An Economic Analysis by Erandathie Pathirja, Ruwan Samaraweera, Hiruni Fernando and Jaan Bogodage (Institute of Policy Studies, Colombo, 2023) oil palm cultivations began in Sri Lanka in the Galle district in 1967. Regional Plantation Companies (RPC) were allowed to cultivate 20,000 hectares using spare rubber land. 

By 2015, 9000 hectares (ha) had come under oil palm. Currently, 10,350 hectares are under oil palm, cultivated by eight RPCs. However, productivity is lower in the Sri Lankan oil palm farms as per the global average. It is 2.5 metric tons (mt) per hectare in Sri Lanka while the global norm is 3.6 mt/ha, the authors of the study say.
The Sri Lankan oil palm sector met 6% of the local demand and helped save US$ 17 million in foreign exchange annually, they say. And despite lower than average global productivity, profitability had been high with fresh fruit bunches yielding 59% profit (though this varies with world prices and local taxes). 
The palm oil sector has a capital investment of Rs. 23 billion and employs 33,390 people. There are 4,297 establishments in the formal sector using palm oil, and employing 360,937 workers. The total output is valued at Rs. 1.6 billion, the Institute of Policy Studies (IPS) document reveals.

In Sri Lanka, an average household consumes about 1.8 litres of fats and oil per month. In 2021, the total annual consumer demand for fats and oils was 111,953 metric tons. And the industrial demand was 163,086 metric tons. The production of crude palm oil was of the order of 29,931 metric tons and the production of coconut oil was 43,038 metric tons.
Local production being inadequate, 74% of Sri Lanka’s edible oil demand was met by imports. According to IPS’s Enrandathie Pathirajah, Sri Lanka had been spending US$ 88 million on edible oil imports. 
As pointed out earlier, oil palm cultivation is subjected to heavy criticism. It is blamed for groundwater depletion, siltation, floods and landslides. But as Erandathie Pathiraja et al said, “few studies in other countries support these criticisms, while a few remain inconclusive.”

The IPS researchers therefore called for further investigations of the criticisms in the Sri Lankan context. They maintained that the need for devising “sustainable” oil palm cultivations with minimum side effects could not be overemphasized. There should be periodic monitoring financed by an import cess or a domestic levy, they suggested. 
While admitting that palm oil consumption could pose health issues, they pointed out that palm oil by itself was not unhealthy but health issues could arise because of storage deficiencies, wilful adulteration and corruption in the trade. 
Above all, the selection of sites for oil palm cultivation should be scientific, they recommended. There are sites which are suitable and sites which are not suitable for oil palm farming. Sites which are scattered over a wide area pose problems for periodic monitoring.  

Industry’s Plea

In 2022, the Palm Oil Industry Association of Sri Lanka (POIASL) appealed to the government to allow the cultivation of oil palm to boost the economy, save forex and increase employment. The POIASL told the government that “continuing to suppress this potentially vibrant, high-performing industry - which can help Sri Lanka and Sri Lankans overcome the present challenges - is irresponsible, unfair and entirely unnecessary.”

As stated earlier, when oil palm cultivation was banned in April 2021, the decision was based on a report put out by the Central Environment Authority (CEA). However, the Agriculture Ministry had stated the benefits of continuing oil palm cultivations. The Agriculture Ministry had said that oil palm cultivation would take less land than for coconut. If the required 80,000 metric tons of oil were to be produced by using coconut, it would require 80,000 hectares, while oil palm would need only 20,000 hectares, as oil palm had four times land productivity than coconut, the Ministry pointed out.
And compared to other edible oils, the Cost of Production (COP) of palm oil was very much lower, it was stated. In 2018, coconut generated Rs. 175,000 per hectare per annum, whilst oil palm generated Rs. 514,000 per hectare per annum.

Dr. Shatadru Chattopadhya, an internationally known expert on sustainable agriculture and food systems, challenged the CEA’s report as well as the ban. He said that oil palm could easily provide five times more oil per hectare, as opposed to alternative crops. By doing so, it would release land for food crops. There would be an overall improvement in food production.
Dr. Chattopadhya further said that oil palm sequestered more carbon per hectare than tea and coconut (though less than rubber). He cited Sri Lankan studies which showed that oil palm cultivation required less fertilizer and less water than coconut, dry rubber or tea. 

Erandathie Pathiraja wrote in her blog that oil palm is more efficient in oil production than coconut: one hectare of oil palm produces nearly four metric tons of oil, while coconut produces only one metric ton of oil, she says. 
“Further, the limited availability of lands (in Sri Lanka) restricts the expansion of coconut lands. Therefore, a combination of coconut and oil palm can be considered to meet the demand for edible oil and other products,” she suggests. 

Oil palm cultivation covers only 12,000 hectares of land, or less than 1% of the total agricultural land in Sri Lanka. Yet, it is seen as a major environmental threat, points out Dr. Chattopadhya. He cites a recent study (Current Biology, July 2020), which found that coconut oil production, by some measures, is more destructive than oil palm cultivation.
The study showed that most coconut-growing countries that were significantly forested in the past were no longer so. Coconut expansion was the main driver of deforestation, Dr. Chattopadhyay contends. Indonesia and Malaysia, which produce around 83% of all palm oil globally, still have 50% and 18.7% under primary forests, respectively, he points out.

Sustainability Framework 

Following Malaysia, Indonesia and India, Sri Lanka should devise a “sustainability framework” for producing oil palm, Dr. Chattopadhya recommends. 
The Indonesian Sustainable Palm Oil (ISPO), the Malaysian Sustainable Palm Oil (MSPO) and the Indian Palm Oil Sustainability (IPOS) framework offer models that can be followed, he says. Producers should be certified by external auditors to conform to international standards. Sri Lanka should also certify its oil palm producers under one of the voluntary certification standards like the Round Table on Sustainable Palm Oil (RSPO), Rainforest Alliance or Fair Trade, Dr. Chattopadhya suggests.