Why edible oil prices have surged to their highest in a decade

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26 Aug, 2025 12:21

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Prices of edible oils such as mustard, vanaspati, soya, palm, sunflower, and groundnut are more than their highest in a decade.

Prices have risen as much as 62 percent from last year, Food Secretary Sudhanshu Pandey said at a recent meeting on the issue.

Data from the ministry of consumer affairs, food and public distribution shows that compared with May 2020, there is a steep rise in price of a kg of various cooking oils -- mustard to Rs 170 from Rs 115, palm to Rs 138 from Rs 85, sunflower to Rs 175 from Rs 110, vanaspati to Rs 140 from Rs 90 soya to Rs 155 per from Rs 100.

What’s causing the spike?

India imports about 65 percent of its annual requirement of 14.5 million tonnes of cooking oils. International prices are rising because of lower output in major producers Indonesia, Malaysia, Argentina, Ukraine and Russia, mostly because of bad weather.

Palm oil supply has fallen because of labour shortage in Malaysia, the world’s second-largest producer in the world. Similarly, in Indonesia and Malaysia, the B30 and B20 biofuel mandates, which increase the amount of vegetable oils mixed in fuel, has increased local consumption, leaving a lower exportable surplus, said Hetal Gandhi, Director, CRISIL Research.

Almost all of India’s palm oil requirement is met from Indonesia and Malaysia. As per ICRA, palm oil is about 40 percent of total consumption in India and 60 percent of imports.

Soybean oil prices are rising because of dry weather in Argentina, the largest exporter, and higher demand from major consumers India and China. Similarly, sunflower oils prices are up because of drought-like conditions in Ukraine and Russia, the largest producers and exporters of the commodity.

About 85 percent of soybean oil in India is imported from Argentina and Brazil, while 90 percent of sunflower oil is imported from Ukraine and Russia, as per CRISIL Research.

Ankit Patel, Vice President and Co-Head, Corporate Ratings, ICRA says, import duty of 32.5 percent on crude palm imports also resulted in higher prices.

Domestic production of oilseeds has also fallen.

“In OY20 (oil year – November to October) the domestic production of soybean, groundnut, mustard, and cottonseed oil was impacted due to lower acreage and crop damage,” says Gandhi of CRISIL Research.

Consumers feel the pinch

Several branded edible oils such as Adani Wilmar-owned Fortune, Marico’s Saffola and Dhara from Mother Dairy are selling at a higher price as shown below. Marico has raised prices by as much as 50 percent in the last two quarters

Wholesale-prices-of-edible-oil-brandsManufacturers such as HUL, Tata Consumer Products, Emami, Colgate-Palmolive, Wipro Consumer Care and ITC have been impacted by the rise in the prices as the palm oil is a key ingredient.

Given the subdued sentiment due to the pandemic, so far, most companies have been cautious about passing on the price rise to consumers, but analysts say, if prices rise further, companies will have to decide whether to take hit on their margins or to pass on the burden to the consumer.

The good news is that experts say that prices are likely to fall in in the second half of OY21 (November’20 to October’21).

“We expect a gradual drop in prices in second half of OY21 as the global supply normalizes, however, the prices will still remain higher as compared to OY20,” says Gandhi of CRISIL Research.

Patel of ICRA also believes that the current price levels are unlikely to sustain.

(With inputs from PTI)