Feb. 5 (Bloomberg) -- No sooner did Indonesia signal higher export taxes on palm oil than India said it may cut import duty.

The moves by the two governments highlight the struggle to contain living costs for their 1.3 billion people. Prices of palm oil and its rival soybean oil hit records today.

``Edible oil is an essential ingredient in our food intake and globally there is a problem,'' said Amol Tilak, an analyst at Mumbai-based Kotak Commodity Services Ltd. ``Demand is huge, while supply hasn't yet improved.''

Economic growth in China and India, drought in Australia and diversion of crops for making ethanol are threatening food security for some of the world's most vulnerable people, the Asian Development Bank said last month. In Asia alone, more than 617 million people live on less than a dollar a day, it said.

Benchmark palm oil prices have more than doubled in the past two years to 3,349 ringgit ($1,070) a metric ton in Malaysia, while soybean oil in Chicago jumped to 56.25 cents a pound from less than 25 cents. Prices of foods from bread to milk have surged, prompting governments to stockpile, restrict exports and buy overseas to safeguard supplies.

``You can only spend so much when you walk into a supermarket,'' Ben Santoso, a plantation analyst at DBS Vickers Securities in Singapore, said today. ``Governments will do something now.''

Indonesia, the world's biggest palm oil producer, announced yesterday it would impose a 15 percent tax on exports should prices exceed $1,100 a ton. The levy will climb to 20 percent if the price rises to $1,200, and to 25 percent if it reaches $1,300, a statement issued by the Coordinating Ministry for Economic Affairs in Jakarta said.

`Main Concern'

India, the world's biggest buyer of edible oil after China, said today it may cut import duties on cooking fats or buy more on global markets. The country cut the import tax four times last year on cooking oils, banned trading in wheat futures and curbed exports of wheat, rice and lentils to boost supply.

``Improving supplies and reducing prices is the main concern for the government,'' said T. Nanda Kumar, India's top official charged with food security, in an interview in Dubai. ``We will continue to track prices and take the steps needed.''

India, also the world's second-largest wheat user, will buy more of the crop from its farmers to help secure stockpiles. The government may buy as much as 15 million tons, up 35 percent from a year earlier, Nanda Kumar said.

World wheat supplies are at their lowest in three decades as wheat prices in Chicago doubled in the past year, reaching a record $10.095 a bushel on Dec. 17.

Pakistan, Malaysia

Pakistan earlier this month deployed troops to guard flour mills to prevent smuggling and hoarding as food shortages and rising prices increased pressure on President Pervez Musharraf's government, which is battling civil unrest.

In Pakistan, the price of wheat flour rose to a record 2,150 rupees ($34) for a 100 kilogram bag, Iqbal Dawood, chairman of the Pakistan Flour Mills Association, said Jan. 17.

Malaysia, Southeast Asia's second-biggest flour consumer, risks running short of grain because the nation's millers can't afford record wheat prices.

Producers are losing money on every bag of flour sold because of state-imposed price controls, Teh Wee Chye, managing director of Malayan Flour Mills Bhd., the second-biggest miller, said in an interview. The Flour Millers Association of Malaysia has asked the government to raise the cap temporarily, he said.

Rising food prices and shortages of staples have been felt outside Asia. Venezuela seized thousands of tons of food and jailed about 30 people for hoarding last month. Government leaders say the country's food shortages are the result of companies hoarding or illegally exporting price-controlled goods.

The government also raised prices on black beans, cheeses, and pork, while exempting flour from price controls altogether. Farmers and store owners say that shortages are caused by inadequate production because price controls mean manufacturers have to sell them for below cost.

To contact the reporters on this story: Thomas Kutty Abraham in Dubai at tabraham4@bloomberg.net; Claire Leow in Singapore at cleow@bloomberg.net

Last Updated: February 5, 2008 08:54 EST