MUMBAI/NEW DELHI (Reuters) - India has issued import licences for 1.1 million tonnes of refined palmolein from Indonesia, government and trade sources told Reuters, a move that has surprised the industry as only last month New Delhi restricted imports of the commodity.

A man assist trucks carry palm oil fruit on a damaged road at Mesuji Raya village in Ogan Komering Ilir, South Sumatra province, Indonesia, January 11, 2017. Antara Foto/Budi Candra Setya/ via REUTERS

A resumption in refined palmolein buying by India, the world’s biggest palm oil importer, could lift its total palm oil imports and support Malaysian palm oil futures, which have corrected a fifth from a three-year high hit in January.

India put refined palm oil and palmolein on the list of restricted items on Jan. 8, a move sources said was retaliation against top supplier Malaysia after its criticism of actions in Kashmir and a new citizenship law.

The move prompted traders to seek permission from the Directorate General of Foreign Trade (DGFT) to import refined palmolein, and the commerce ministry’s wing received more than 100 applications for licences.

The DGFT has issued import licences for 1.1 million tonnes of refined palmolein to traders based on their applications, a government official and three traders told Reuters.

New Delhi has given permission to import refined palmolein only from Indonesia, a government official said.

In the second week of January New Delhi privately urged palm oil importers to boycott Malaysian products after Prime Minister Mahathir Mohamad criticised India’s actions in Kashmir and its new citizenship law.

In their application importers were required to mention “country of origin” and all specified Indonesia, said one trader who received a licence.

“I don’t know anyone who mentioned Malaysia as the country of origin. I know a few others who mentioned Indonesia,” the trader said.

HUGE VOLUME

The allocation of licences surprised the industry and senior officials of the commerce ministry.

“Allowing large-scale imports of refined palmolein defeats the purpose of putting the commodity in the restricted list for imports,” said B.V. Mehta, executive director of trade body the Solvent Extractors’ Association (SEA), which is based in Mumbai.

India’s edible oil industry has been seeking import curbs on refined palm oil to boost local refining.

At a meeting with industry officials on Wednesday, a senior official of the commerce ministry expressed displeasure at allowing large-scale imports of refined palm oil, and asked DGFT officials not to allocate more licences, said a trader who attended.

A rally in edible oil prices in the last few weeks prompted New Delhi to examine changes in the import policy, said another government official.

India’s commerce ministry did not respond to a request for further information.

New Delhi’s palm oil imports in January fell 27% from a year ago to 594,804 tonnes, partly due to the restriction on imports of refined palm oil, the SEA said in a statement.

India imported 9.4 million tonnes of palm oil in the marketing year that ended on October 31, including 2.72 million tonnes of refined palm oil.

Palm oil makes up nearly two-thirds of India’s total imports of edible oil. It buys palm oil mainly from Indonesia and Malaysia, which are the world’s top and second biggest producer of the commodity respectively.