Palm oil is under scrutiny over environmental concerns including in the European Union. The European Commission said earlier this year that palm oil should be phased out from transport fuel in the bloc after it concluded that it causes deforestation.

Ojak Simon Manurung, director of goods and services circulation supervision at Indonesia's Trade Ministry, said the ministry had conducted inspections at over a dozen supermarkets in Jakarta in the past few days.

Goods carrying "palm oil-free" labels on their packaging, mostly locally-made foods and snacks, were removed from display, Manurung told reporters.

He said the ministry conducted the inspection after the country's Drug and Food Control Agency (BPOM) said "palm oil- free" labelling does not meet its criteria, but he did not elaborate on such criteria.

"We followed it up by making sure that there are no more products that have "palm oil-free" labels," Manurung said. "BPOM has advised these products should not be distributed and the labels fixed."

BPOM said in a statement on Wednesday that it will not approve for distribution products with "palm oil-free" labels, saying that palm oil is "safe" and the labels are reducing palm oil's competitiveness.

In rival producer, Malaysia, authorities earlier this year appealed to retailers including supermarket operators to refrain from importing food products carrying "no palm oil" or "palm oil-free" labels, according to local media reports.

Pressure from the EU and elsewhere to cut use of palm oil has resulted in a slowdown in exports of the vegetable oil.

That is on top of slowing demand from India due to import tariffs imposed by the world's top vegetable oil importer.

Tutum Rahanta, deputy chairman of Indonesia's retailer association (Aprindo), said retailers would cooperate with authorities.

"If the aim of the labels was to discredit (palm oil), I think its fair for Indonesia to protect its main product with its own rules," he told Reuters. "We as retailers will follow the rules."

Last week the European Commission also imposed countervailing duties of 8pc to 18pc on imports of palm-based biodiesel from Indonesia.