India trade body wants cap on refined palm oil imports

MUMBAI (Reuters) - India should cap imports of refined palm oil and palmolein at a maximum 50,000 tonnes per month to boost local refining capacity and support local oilseed growing farmers, a top trade body said on Tuesday.

The plea to the government by the Solvent Extractors' Association comes amid a virtual ban on imports of refined palm oil from Malaysia amid a diplomatic row.

India, the world's biggest importer of edible oils, last week issued a notification declaring that the import of refined palm oil "is amended from 'Free' to 'Restricted.'"

The move came after New Delhi objected to Malaysian Prime Minister Mahathir Mohamad's criticism of India's new religion-based citizenship law. The 94-year-old premier earlier accused India of invading the disputed Muslim-majority region of Kashmir.

Mahathir defended his criticism of India on Tuesday.

Indian palm oil importers have effectively stopped all purchases from top supplier Malaysia after the government privately urged them to boycott its product following the row, industry and government sources said.

The Mumbai-based trade body said in a letter to India's Ministry of Commerce and Industry and released to the media that though the curbs were instituted last week, the government may issue licences for import of refined palm oil for the public distribution system, which could lead to a surge in imports unless regulated.

The commerce ministry's response to the plea was not immediately known. The ministry did not immediately respond to an emailed request for comment.

India is the world's largest importer of palm oil, buying more than 9 million tonnes annually mainly from Indonesia and Malaysia.

(Reporting by Rajendra Jadhav; Editing by Muralikumar Anantharaman)