The Russia-Ukraine war that completes a month on March 24 has hit Indian household budgets hard, with edible oil prices surging 20-30 percent in March alone. Year on year, the prices have skyrocketed 70 percent.
With no end in sight to the conflict that has sent global commodity prices zooming, there are concerns that disruption in supply will further push up the price of sunflower oil, already up $400-450 a metric tonne over the year.
Ukraine and Russia together account for about 60 percent of the global sunflower oil production and exports. The Black Sea region accounts for 60 percent of world sunflower oil output and 76 percent of exports, and India is the top global edible oil importer, a Reuters report said.
As Ukraine and Russia supply almost five lakh tonnes of sunflower oil to India annually, experts have contrasting views on the rising prices of sunflower oil and what lies ahead.
Will sunflower oil prices rise in India?
''For sunflower oil, the worst in terms of both international and domestic prices is probably over. The Indian consumption pattern is changing, which should keep a lid on the prices going forward,'' said Atul Chaturvedi, President at Solvent Extractors' Association (SEA) in an exclusive interview to CNBC-TV18.
''Groundnut oil is now considered as an oilseed and palm oil is being treated as a premium oil—just like sunflower oil. Also, the mustard crop in India has cooled down the sudden surge in prices.''
India is set to harvest 120 lakh tonnes of mustard crop and crush around 15 lakh tonnes a month.
Chaturvedi does not anticipate a surge in sunflower oil prices in FY23 unless international crude prices go through the roof again.
Others, however, think a hike is imminent.
''At the moment, we see relief on sunflower oil prices as the government had scrapped basic customs excise duty, however, after two months, a 5-10 percent increase in prices cannot be ruled out,'' Sanjeev Kumar Asthana, Chief Executive Officer (CEO), Ruchi Soya Industries, told CNBC-TV18.
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India's imports dependence
Edible oil prices have been rising in India for almost a year. They are up 70 percent from the year-ago period. First, it was the coronavirus-led surge as supply chains were disrupted and now it is the Ukraine war. Within a month, prices have gone up 20-30 percent.
India imports 60 percent of its edible oil requirements, which is about 13 million tonnes out of total consumption of 22-23 million tonnes.
Sunflower oil accounts for two million tonnes, or 15 percent, of India's total imports. Ukraine is the largest exporter of sunflower oil in the world. The country also produces almost 46 percent of the world's sunflower and safflower oil.
''We have to watch out on sunflower oil price hike as India's 60-65 percent dependency on imports will consistently remain,'' said Asthana of Ruchi Soya.
The critical part to watch out for would be how the spring planting would play out in April-May in both Russia and Ukraine with the war still raging, he said.
''In Ukraine, there is an expectation that 50 percent planting may not be done. This could cause a big impact, as Ukraine supplies almost 60 percent sunflower oil to global markets,” Asthana said.
India consumes about 200,000 tonnes of sunflower oil a month.
Even though the Ukraine-Russia standoff disrupted the supply but imports were reasonable in February and March, Chaturvedi of Solvent Extractor's Association said.
The demand for sunflower oil in the country varies across regions and in case of unavailability, consumers may substitute it with soya or groundnut oil, of which India is the second-largest producer.
''The core demand of sunflower oil which cannot be replaced with any other oil but, in southern India, the replacement of sunflower oil is being seen partly with groundnut oil and palm oil,'' Chaturvedi said.
Asthana said sunflower oil was largely consumed in southern and western parts of India and some areas of Odisha.“The consumers mostly belong to the upper-middle class and can afford to pay. In case of unavailability, they won't instantly switch over. However, the demand will switch to soya and groundnut oil,'' he said.