Indonesia and India discuss trade next week with rice and edible oils likely to be on the agenda as Jakarta faces cuts in supplies of the grain from Thailand and New Delhi considers retaliation for a hike in crude palm oil prices.
India, the world's biggest buyer of vegetable oils, is sending Trade Minister Anand Sharma to visit Jakarta, capital of the world's biggest palm oil producer, on Tuesday, barely a month after Indonesia moved to boost its refined palm oil exports by reducing taxes on the product, and hiking tariffs on crude palm oil.
India's own refining industry said the step was a potential "death blow". The visit comes only days after Indonesian Trade Minister Mari Pangestu said the country would seek alternative shipments of rice after the reported cancellation of a proposed sale of 300,000 tonnes of rice from Thailand.
"Indonesia to take a million of the two million India rice exports, I don't see that happening," said Pawan Kumar, a Singapore-based analyst at Rabobank. "It will partly take from India," he said. "This can only happen if there is some kind of treaty, where India agree to give this, but in return you give me that."
India, the world's second-biggest rice producer, is sitting on a huge inventory and heading for a record harvest on the strength of normal monsoon rains. In September, a confident New Delhi said it would allow two million tonnes of rice exports, and the government also does some direct sales to neighbouring countries. But its edible oils refining industry could be hard hit by Indonesia's palm oil tax changes and the government could make imports costlier within the next two weeks.