Introduction

Oilseeds are a cornerstone of India’s agri-food system, contributing to food security through dietary energy and essential fatty acids. Soybean, groundnut, mustard, sunflower, and other oilseeds support crop diversification and improve farm incomes, particularly in rain-fed and resource-poor regions. Strengthening domestic oilseed production aligns with Sustainable Development Goal 2 (Zero Hunger) by promoting resilient agricultural practices and crop diversification, reducing rural poverty, enhancing nutrition, and improving access to safe and affordable food.

Despite gains in production, expanded cultivation, and greater farmer participation, the sector continues to exhibit structural and economic vulnerabilities. A key concern is the sharp rise in import dependence, which now accounts for over 56 percent of domestic consumption—approximately 16 million tonnes annually—up from about 15 percent in 1995–96.^[1]

Edible oil demand has consistently outpaced domestic production, driven by population growth, rapid urbanisation, rising per capita incomes, evolving dietary preferences, emerging demand centres such as China and India, and growing demand for biofuels. Per capita edible oil consumption in India has increased from 3.2 kg per annum in 1960–61 to 3.8 kg in 1980–81, 8.2 kg in 2000–01, 15.8 kg in 2012–13, and further to 19.7 kg per annum in recent years.^[2]

While demand has grown at an average annual rate of 4.3 percent, oilseed production has expanded at a comparatively modest rate of 2.2 percent, widening the supply–demand gap and increasing reliance on imports. This persistent shortfall has heightened India’s exposure to global price volatility and supply disruptions.^[3] At the international level, this vulnerability is accentuated by exchange-rate fluctuations that transmit external shocks into domestic markets, impacting millions of Indian oilseed farmers.

A strategic realignment that capitalises on evolving global dynamics is critical to reposition India in the oils and derivative products market—not just for self-reliance, but to unlock export opportunities, increase farmer incomes, and build economic resilience.

Although a substantial body of research examines India’s edible oil economy—covering yield gaps, rain-fed vulnerabilities, Minimum Support Price (MSP) effectiveness, import dependence, and market volatility—much of it is confined to a domestic production-focused lens. Existing studies predominantly emphasise improving productivity, enhancing procurement mechanisms, and reducing import reliance through horizontal or vertical expansion of oilseed crops.

This paper extends the research by adopting a globally contextualised perspective that situates India’s oilseed sector within the evolving global edible oil market. By analysing India’s structural position in global value chains (GVCs), it demonstrates how limited upstream integration contributes to chronic price-taking behaviour and heightened vulnerability to geopolitical and market shocks, an analytical approach that remains underexplored in Indian policy scholarship.

The second contribution lies in a crop-specific, value-chain framework that departs from the conventional ‘one-sector, one-policy’ narrative. Rather than treating oilseeds as a homogeneous category, the paper distinguishes between different oilseeds, highlighting their distinct agronomic characteristics, value-chain bottlenecks, by-product market dynamics, and export opportunities. This granular approach underscores the need for differentiated strategies rather than generic interventions, thereby enriching the ongoing discourse on oilseed sector reforms.

Finally, this paper proposes a forward-looking, outward-oriented strategy for India’s oilseed sector grounded in global competitiveness and value addition, rather than mere import substitution alone. The recommendations—such as establishing Special Oil Zones (SOZs), non-GMO traceability systems, plant-based protein value chains, price-triggered sliding tariffs, and offshore edible oil partnerships—move beyond traditional policy prescriptions focused on MSP, input subsidies, and productivity enhancements.

In doing so, the paper reframes India’s edible oil challenge as both a structural vulnerability and a global market opportunity, offering an integrated policy vision that bridges GVC participation, institutional innovation, sustainability, and farmer-centric risk management. This holistic approach represents a substantive contribution to the scholarship on agricultural transformation and edible oil policy in India.

Current State of Institutional Support for Oilseeds

India’s experience with oilseed development reflects a shift from focused technology missions to large integrated national programmes. It began with the launch of the Technology Mission on Oilseeds (TMO) in 1986, aimed at raising production through improved agronomic practices and better seed varieties, and moving from fragmented interventions to a mission-mode approach. Empirical studies and official assessments suggest that TMO contributed to increases in yields and output during its active phases, particularly in regions with strong adoption of improved technologies. However, its impact remained uneven across states and was limited by its relatively narrow geographic coverage and dependence on short-term subsidies and demonstration-led approaches.

This was followed by the Integrated Scheme of Oilseeds, Pulses, Oil Palm, and Maize (ISOPOM) in 2004, which sought to provide flexibility to states in implementing region-specific strategies. In 2014, the government launched the National Mission on Oilseeds and Oil Palm (NMOOP), focusing on area expansion and productivity enhancement. In 2018, this was subsumed under the National Food Security Mission (NFSM)–Oilseeds and Oil Palm, marking a transition towards wider coverage and more structured targeting. Oilseeds were formally brought within the NFSM to replicate earlier mission-mode gains at a national scale through district-level interventions. While the NFSM contributed to incremental improvements in oilseeds output, its oilseeds component often competed for resources and attention with cereals and pulses, limiting its transformative impact. Nonetheless, it laid the groundwork for better monitoring systems, clearer physical targets, and convergence with state-level schemes.

Table 1: Programmes Promoting Oilseeds Production

Mission	Year	Achievements[4]
Technology Mission on Oilseeds (TMO)	1986–2004	Year Area (Lakh Ha) Production (LT) Yield (Kg/Ha) 1986–87 186.26 112.70 605 2004–05 275.23 243.54 885
Integrated Scheme on Oilseeds, Pulses, Oil Palm, and Maize (ISOPOM)	2004–2014	Year Area (Lakh Ha) Production (LT) Yield (Kg/Ha) 2004–05 275.23 243.54 885 2014–15 255.96 275.11 1075
National Mission on Oilseeds and Oil Palm (NMOOP)	2014–2018	Year Area (Lakh Ha) Production (LT) Yield (Kg/Ha) 2014–15 255.96 275.11 1075 2018–19 247.94 315.22 1271
National Food Security Mission (NFSM)–Oilseeds and Oil Palm	2018–2023/24	Year Area (Lakh Ha) Production (LT) Yield (Kg/Ha) 2018–19 247.94 315.22 1271 2023–24 301.92 396.69 1314
National Mission on Edible Oils–Oil Palm (NMEO–OP)	2021–present	Year Area (Lakh Ha) FFB Production (LT) CPO Production (LT) 2021–22 3.70 20.51 3.48 2023–24 4.97 22.44 3.95

Source: Authors’ own, using sources as cited.  

In 2021, the National Mission on Edible Oils–Oil Palm (NMEO–OP) was launched with an outlay of INR 11,040 crore, targeting a cumulative 10 lakh hectares under oil-palm cultivation. It is being implemented in 15 states and provides financial assistance to farmers at every stage of cultivation. The mission aims to boost productivity by aiding critical inputs like drip irrigation, water-harvesting structures, pumps, vermicompost units, and essential tools. The Northeast receives additional support for land clearing, bio-fencing, and processing units. Given the high perishability of fresh fruit bunches, the scheme prioritises the development of processing and logistics infrastructure, anchored through public–private partnerships to support farmers. Through tripartite Memoranda of Understanding (MoU) between farmers, processors, and state governments, procurement of fresh fruit bunches is assured at transparent, remunerative prices. A price-gap funding mechanism has been built in to protect farmers from market volatility.^[5]

In October 2024, the National Mission on Edible Oils–Oilseeds (NMEO–OS) was launched with an outlay of INR 10,103 crore.^[6] The mission targets increasing oilseed production from 39.2 million tonnes to 69.7 million tonnes by 2030–31, along with substantial yield and area expansion. Together with the NMEO–OP, it seeks to increase domestic edible oil production to 25.45 million tonnes by 2030–31, meeting around 72 percent of the projected domestic requirement. The TMO focused largely on production technologies, but the NMEO focuses on the entire value chain, which combines on-farm productivity measures with efforts to expand oil palm cultivation, improve extraction from primary and secondary oilseeds, and strengthen processing and marketing linkages. Since 2021, India has recorded its highest levels of oilseeds production and productivity, reflecting the combined effects of favourable weather, improved price incentives, and sustained government support under these missions. This suggests that integrated scale-neutral programmes can deliver measurable gains at the national level.

Overall, the comparison highlights that technology missions were effective as catalytic technology-driven interventions, while the NFSM and NMOOP/NMEO represent a more mature integrated policy framework aimed at sustained national-scale impact. The policy lesson is not to view these approaches as substitutes but as sequential stages: early missions built the technological and institutional base, while current programmes seek to consolidate gains through value-chain integration and clearer accountability. Going forward, the NMEO’s effectiveness will depend on rigorous impact evaluation, improved extraction efficiency, and ensuring that productivity gains translate into stable, remunerative outcomes for farmers.

In addition to these initiatives, the Government of India has introduced the Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) in 2018 to ensure price protection for farmers through mechanisms such as public procurement and price differential payments.^[7] Under this scheme, procurement of oilseeds is facilitated by agencies such as the National Agricultural Cooperative Marketing Federation of India (NAFED) and various state-level bodies. These agencies are entrusted with the procurement of 22 mandated crops (including oilseeds) at MSP, with the objective of reducing market uncertainty for farmers.^[8] To streamline procurement and enhance transparency, digital platforms such as NAFED’s e-Samridhi portal and the National Cooperative Development Corporation’s (NCDC) Central Public Procurement Portal have been developed for farmer registration and transaction facilitation. Furthermore, states have the option to adopt a price differential payment mechanism, wherein the difference between the MSP and the prevailing market price is directly transferred to farmers through Direct Benefit Transfer (DBT) if the market price falls below the MSP, without undertaking physical procurement through central agencies.

Core Issues Faced by India’s Edible Oil Sector

India’s edible oil sector is characterised by a persistent and widening gap between domestic production and consumption, resulting in high imports. Despite steady growth in oilseed production, structural constraints—yields below the world average, high production risk, price volatility, global market exposure, underdeveloped hedging mechanisms, inconsistent trade policy, and weak integration into GVCs—have collectively prevented the country from achieving even modest self-sufficiency. This section examines these interlocking challenges in a logical sequence: 1) the demand–supply imbalance and import dependence; 2) the structural divide in production stability between cereals and oilseeds; 3) price-risk exposure and limited hedging; 4) pressures transmitted from downstream value-chain nodes; 5) India’s marginal role in GVCs; 6) the lack of a counter-cyclical trade policy; and 7) crop-specific constraints that necessitate differentiated policy approaches.

Oil Demand Rising Faster than Oilseed Yield, Leading to Import Dependency

Although domestic oilseed production has increased steadily, it has not kept pace with rising consumption. Yields grew at a compound annual growth rate (CAGR) of 1.9 percent between 1980 and 2022, insufficient to match India’s expanding demand for edible oils. India’s average oilseed yield stands at 1,294 kg/hectare, while countries like the United States (US) and Brazil regularly achieve more than 3,000 kg/hectare for soybean.^[9] With limited scope for horizontal expansion (given that agricultural land across the country is more or less saturated), the persistent gap between domestic production and consumption has paved the way for a heavy increase in imports of edible oils, resulting in huge import dependence of around 56 percent to meet domestic needs.

Table 2: Production and Yield Trends of Oilseeds

Year	Area (in Lakh Ha)	Production (in Lakh Tonnes)	Yield (Kg/Ha)
2011–12	263.08	297.99	1133
2012–13	264.84	309.41	1168
2013–14	280.53	327.54	1168
2014–15	255.98	275.11	1075
2015–16	260.87	252.51	968
2016–17	261.77	312.76	1195
2017–18	245.08	314.59	1284
2018–19	247.94	315.22	1271
2019–20	271.39	332.19	1224
2020–21	288.34	359.46	1247
2021–22	289.45	379.63	1312
2022–23	302.39	413.55	1368
2023–24	301.92	396.69	1314
2024–25	304.40	429.89	1412
2025–26*	294.29	409.98	1393

Source: Department of Agriculture & Farmers’ Welfare.^[10]

Note: Excludes summer season as the estimates have not been released.

Table 3: Oilseeds Production: Top 10 Countries and India

Country	Yield	Area	Production
	(Kg/Ha)	(Lakh Ha)	(Lakh Tonnes)
Germany	3,475	10.26	35.67
United States	3,320	359.86	1,194.57
Brazil	3,243	378.13	1,226.26
France	2,862	19.39	55.51
Argentina	2,760	185.6	512.3
Paraguay	2,554	35.79	91.38
China	2,419	222.35	537.86
Ukraine	2,349	87.88	206.47
Canada	2,234	113.79	254.21
Bolivia	2,199	14.13	31.08
India	1,294	275.98	357.09

Source: FAOSTAT Database, 2025 ^[11]

*Average of Area, Production, and Yield from 2018–19 to 2022–23.

Table 4: Per Capita Oil Consumption Over the Years in India

Edible Oil	Year	Rural	Urban
Groundnut Oil	1993–1994	1.44	2.88
	1999–2000	1.44	2.76
	2004–2005	0.84	1.92
	2009–2010	0.65	1.51
	2022–2023	0.25	0.57
Refined Oil	2011–2012	2.72	4.80
Coconut Oil	2009–2010	0.19	0.21
	2011–2012	0.18	0.19
	2022–2023	0.16	0.34
Mustard Oil	1993–1994	2.04	1.80
	1999–2000	2.88	3.00
	2004–2005	2.64	2.40
	2009–2010	3.44	2.76
	2011–2012	3.65	2.90
	2022–2023	4.79	3.46
Vanaspati	1993–1994	0.36	0.72
	1999–2000	1.08	0.72
	2004–2005	0.36	0.60
	2009–2010	0.43	0.43
	2011–2012	0.24	0.25
	2022–2023	0.03	0.05
Edible Oil (Others)	1993–1994	0.60	1.32
	1999–2000	1.08	2.04
	2004–2005	1.68	3.00
	2009–2010	2.92	4.89
	2011–2012	0.83	1.13
	2022–2023	0.39	0.58

Source: NSSO Household Consumption Expenditure Survey.^[12]

Import volumes have risen from 1.47 MMT in 1986–87 to 14.19 MMT in 2021–22 to 16 MMT in 2024–25.^[13] Of the total edible-oil imports, 55–57 percent comprises palm oil, with the rest consisting of soybean oil and sunflower oil. Over the past decade, the imports of vegetable oils^[a] have increased from 10.5 million tonnes in 2011–12 to 16 million tonnes in 2024–25,^[14] making India the world’s largest edible-oil importer, leaving behind even the US and China, with imports costing over US$16 billion annually,^[15] draining foreign exchange. This dependence heightens vulnerability to global supply shocks, currency fluctuations, and geopolitical events, undermining food security and fiscal stability.

Table 5: Trends in Edible-Oil Self-Sufficiency in India

Year	Domestic Availability of Edible Oils	Imports of Edible Oils	Total Availability/ Consumption	% Self Sufficiency	% Share of Imports
(November– October)
1995–96	64.68	11.61	76.29	84.78	15.22
1996–97	71.27	14.06	85.33	83.52	16.48
1997–98	60.58	12.66	73.24	82.71	17.29
1998–99	69.6	26.22	95.82	72.64	27.36
1999–2000	60.15	41.96	102.11	58.91	41.09
2000–01	54.99	41.77	96.76	56.83	43.17
2001–02	61.46	43.22	104.68	58.71	41.29
2002–03	46.64	43.65	90.29	51.66	48.34
2003–04	71.4	52.9	124.3	57.44	42.56
2004–05	72.47	45.42	117.89	61.47	38.53
2005–06	83.16	42.88	126.04	65.98	34.02
2006–07	73.7	47.15	120.85	60.98	39.02
2007–08	86.54	56.08	142.62	60.68	39.32
2008–09	84.56	81.83	166.39	50.82	49.18
2009–10	79.46	88.23	167.69	47.39	52.61
2010–11	97.82	72.42	170.24	57.46	42.54
2011–12	89.6	99.4	189.0	47.41	52.59
2012–13	92.2	106	198.2	46.5	53.5
2013–14	101.9	109.8	211.7	48.1	51.9
2014–15	92	138.5	230.5	40	60
2015–16	86.3	148.5	234.8	36.8	63.2
2016–17	100.99	153.17	254.16	39.7	60.3
2017–18	103.8	145.92	249.72	41.6	58.4
2018–19	103.52	155.7	259.22	40	60
2019–20	106.55	134.16	240.71	44.3	55.7
2020–21	111.51	134.52	246.03	45.3	54.7
2021–22	116.5	141.93	258.44	45.1	54.9
2022–23	124.23	165	289.23	42.95	57.04
2023–24	121.75	156.55	278.3	43.74	56.25
2024–25	125.18	160	285.18	43.89	56.11

Source: Authors’ calculations.^[16]

Figure 1: Trends in Edible Oil Availability in India

Source: Authors’ calculations.^[17]

The Cereal–Oilseed Stability Divide

A comparison of cropped area between 2000–01 and 2024–25 reveals clear regional patterns in the growth and decline of oilseed cultivation in India. Although total cropped area has expanded across most regions, this expansion has been driven primarily by cereals and cash crops, with oilseeds showing uneven and regionally concentrated growth.

Table 6: Regional Dynamics of Area Under Different Crops (2000–25)

Region[b]	Area (2000–01) (Lakh/Ha)	Area (2024–25) (Lakh/Ha)
Central India	287.14	471.08
Cash Crops[c]	10.97	12.77
Cereals[d]	157.28	242.21
Oilseeds[e]	73.98	130.4
Pulses[f]	44.91	85.7
Eastern India	205.25	214.82
Cash Crops	17.89	28.3
Cereals	169.07	166.06
Oilseeds	6.71	8.99
Pulses	11.58	11.47
Northern India	358.96	392.94
Cash Crops	33.59	35.49
Cereals	283.51	307.11
Oilseeds	15.88	28.93
Pulses	25.98	21.41
Southern India	250.15	265.78
Cash Crops	26.93	37.1
Cereals	141.02	161.01
Oilseeds	25.35	13.65
Pulses	56.85	54.02
Western India	234.72	293.53
Cash Crops	38.5	54.79
Cereals	120.69	99.64
Oilseeds	39.15	78.9
Pulses	36.38	60.2
Grand Total	1367.36	1665.93

Source: Agriculture Statistics at a Glance, 2025–26.^[18]

Central India, comprising Madhya Pradesh and Rajasthan, stands out as the principal region where oilseed cultivation has expanded in absolute terms. The total cropped area increased from about 287 to 471 lakh hectare, with oilseed area rising from roughly 74 to 130 lakh hectare. This growth is attributable to soybean expansion in Madhya Pradesh and mustard in Rajasthan, supported by agro-climatic, suitability, and MSP signals. However, cereals expanded even more rapidly, indicating that oilseed growth has occurred alongside, rather than in place of, cereal expansion. This points to area expansion and land reallocation, rather than a fundamental shift towards oilseeds as the dominant crop.

Eastern India, including Bihar, Odisha, and West Bengal, shows near-stagnation in overall cropped area, increasing only marginally from about 205 to 215 lakh hectare. Oilseeds remain a miniscule component of the regional cropping pattern, increasing slightly from around 7 to 9 lakh hectare. The region continues to be dominated by rice-based systems, with limited diversification. Weak processing infrastructure, limited market depth, and strong cultural and policy preferences for cereals have prevented oilseeds from emerging as a viable alternative.

Northern India, comprising Punjab, Haryana, and Uttar Pradesh, experienced moderate growth in total cropped area, from about 359 to 393 lakh hectare. Oilseed area nearly doubled from around 16 to 29 lakh hectare, largely reflecting mustard expansion in Uttar Pradesh and Haryana. Despite this increase, oilseeds continue to occupy a small share of the regional crop portfolio. The wheat–rice MSP and procurement regime remains the dominant determinant of land use, with oilseeds largely confined to rotational roles rather than cultivated as primary income crops.

Southern India, including Karnataka, Tamil Nadu, Andhra Pradesh, and Telangana, exhibits the clearest structural decline in oilseed cultivation. While total cropped area rose modestly from about 250 to 266 lakh hectare, oilseed area fell sharply from around 25 to 14 lakh hectare. This decline reflects a sustained shift toward irrigated cereals, maize, cotton, and other cash crops. Rising labour costs, price volatility, and higher yield risk have rendered traditional oilseeds such as groundnut increasingly uncompetitive in this region.

Western India, comprising Gujarat and Maharashtra, recorded a substantial increase in total cropped area from about 235 to 294 lakh hectare. Oilseed area increased from roughly 39 to 79 lakh hectare, though this growth was uneven and state specific. Gujarat continues to maintain groundnut and mustard cultivation in certain pockets, while Maharashtra’s oilseed area remains volatile and increasingly crowded out by cotton and other cash crops. The regional increase thus reflects localised competitiveness rather than a broad-based structural shift.

Overall, although oilseed area has expanded in absolute terms in parts of Central and Western India, it has declined or stagnated in others and has failed to keep pace with the faster expansion of cereals and cash crops nationwide. The net outcome is a relative decline of oilseeds in India’s cropping pattern, driven by policy-induced cereal dominance, higher risk, lower relative returns in oilseeds, and region-specific crop competition.

Oilseed cultivation in India remains structurally constrained by limited access to assured irrigation, restricting both acreage expansion and yield growth. Almost 72 percent of the area under oilseeds is rain-fed, which has held back yield improvement by discouraging investment in yield-enhancing inputs.^[19],^[20] Paradoxically, the expansion of irrigation infrastructure itself has further marginalised oilseeds by reinforcing cropping patterns biased towards water-intensive crops such as rice and sugarcane.

In irrigated regions, assured water availability, combined with policy incentives—including MSP, subsidised electricity, and well-established procurement mechanisms—has encouraged farmers to allocate irrigated land to crops offering higher and more stable returns.^[21] In contrast, oilseeds lack comparable procurement support and are subject to pronounced price volatility, leading to their exclusion from irrigated systems despite their relatively lower water requirements. This price instability is further compounded by yield fluctuations, resulting in heightened revenue volatility that increases production risk and discourages farmers from allocating land and capital to oilseed cultivation. Such volatility directly affects farm incomes, price formation, and cropping decisions, particularly in predominantly rain-fed production systems.

To capture yield instability, this study employs both the Coefficient of Variation (CV) and the Cuddy–Della Valle-Instability Index (CDVI). While the CV measures relative dispersion, the CDVI adjusts for underlying time trends, thereby providing a more robust estimate of ‘true’ instability.^[22]

Price Instability

Table 7 and Figure 2 illustrate the divergence in risk profiles of cereals and oilseeds. While cereals show high R² values (>0.85) and low CDVI values, indicating stable and predictable growth, oilseeds exhibit much higher CDVI values.

Table 7: Instability Parameters of Agricultural Prices (2011–2025)

Category	Crop	Mean (Rs/Qtl)	CV (%)	R2	CDVI (%)
Cereals	Wheat	1,943	17.81	0.86	6.62
	Rice	2,162	13.95	0.89	4.62
Oilseeds	Soybean	4,059	24.40	0.35	19.67
	Sunflower	4,199	24.32	0.74	12.40
	Groundnut	4,876	17.85	0.66	10.41
	Rapeseed-Mustard	4,524	25.24	0.68	14.28

Source: Agmarknet Database.^[23]

Note: All values rounded to two decimal places. 

Figure 2: Instability Parameters of Agricultural Prices (2011–2025)

The results point to a pronounced structural divide between cereals and oilseeds.

Table 8: High Yield Instability in Oilseeds vs Cereals (1984–2025)

Crop	Period	Mean Yield	Std Dev	CV (%)	R-Squared	CDVI (%)
Wheat	1984–94	2126.5	190.3	8.95	0.84	3.58
	1994–2004	2673.7	109	4.08	0.37	3.24
	2004–14	2888.7	213	7.37	0.93	1.95
	2014–25	3381.5	268.3	7.93	0.73	4.12
	Overall	2767.6	487.1	17.6	0.93	4.66
Rice	1984–94	1612.3	154.6	9.59	0.83	3.95
	1994–2004	1933.3	133.6	6.91	0.2	6.18
	2004–14	2244.7	156.4	6.97	0.85	2.70
	2014–25	2650	182.7	6.89	0.97	1.19
	Overall	2110.1	418.1	19.82	0.95	4.43
Groundnut	1984–94	891.3	114.6	12.86	0.16	11.79
	1994–2004	998.6	189.4	18.97	0.01	18.87
	2004–14	1333.3	299.7	22.48	0.24	19.60
	2014–25	1797.1	292.7	16.29	0.6	10.30
	Overall	1255.1	414.5	33.02	0.7	18.09
Soybean	1984–94	838.5	167.4	19.96	0.45	14.80
	1994–2004	1007.4	140	13.9	0	13.90
	2004–14	1137.9	149	13.09	0.23	11.49
	2014–25	1030.1	137.8	13.38	0.15	12.34
	Overall	1003.5	182.1	18.14	0.29	15.29
Sunflower	1984–94	473.3	87.3	18.45	0.29	15.55
	1994–2004	620.5	62	9.99	0.35	8.05
	2004–14	671.4	79	11.77	0.37	9.34
	2014–25	954.5	193.1	20.23	0.88	7.01
	Overall	680	201.5	29.64	0.73	15.40

Source: Agricultural Statistics at a Glance, 2025–26^[24]

As shown in Table 7 and summarised across decades in Table 8, cereals—specifically rice and wheat—exhibit consistently low instability, with overall CDVI values below 5 percent. This reflects the cumulative impact of assured irrigation, widespread adoption of high-yielding varieties, and strong institutional support through public procurement and price guarantees. Rice, in particular, shows a marked decline in instability over time, with the CDVI falling to negligible levels in the most recent decade.

Table 9: CDVI (%) Across Four Decades

Crop Category	Crop	1984–94	1994–2004	2004–14	2014–25	Overall	Stability Status
Cereals	Wheat	3.58	3.24	1.95	4.12	4.66	Stable
	Rice	3.95	6.18	2.70	1.19	4.43	Stable
Oilseeds	Groundnut	11.79	18.87	19.60	10.30	18.09	Unstable
	Rapeseed-Mustard	8.36	12.84	4.61	6.87	8.56	Unstable
	Soybean	14.80	13.90	11.49	12.34	15.29	Unstable
	Sunflower	15.55	8.05	9.34	7.01	15.40	Unstable

Source: Authors’ own calculations^[25]

In contrast, oilseeds display higher and persistent volatility. Figure 3 illustrates that their average yield instability is nearly three times that of cereals. Groundnut emerges as the most volatile crop in the study, with an overall CDVI of 18.09 percent, followed by sunflower (15.40 percent) and soybean (15.29 percent). The high instability reflects their cultivation environment. Unlike cereals, oilseeds are primarily grown on rain-fed and marginal lands, making productivity highly sensitive to monsoon variability and the absence of the protective ‘irrigation shield’ enjoyed by cereals.

Figure 3: Yield Instability Index (CDVI): Cereals vs Oilseeds, 1984–2025

Source: Pictorial representation of Table 9, based on authors’ own calculations.^[26]

Economic Return and Revenue Stability

Revenue per hectare, the product of yield per hectare and price, is the ultimate indicator of farmer welfare. Table 10 highlights that although oilseeds can yield high nominal returns, their income stability is compromised by volatility. 

Table 10: Economic Return and Revenue Instability Analysis (2011–25)

Crop	Metric	Mean Value*	CV (%)	R2	CDVI (%)	Stability Profile
Rice
	Price	2,161.90	13.95	0.892	4.63	Stable
	Revenue	57,753.00	20.57	0.933	5.32	Stable
Wheat
	Price	1,943.65	17.81	0.862	6.66	Stable
	Revenue	65,744.09	23.59	0.914	6.91	Stable
Groundnut
	Price	4,876.17	17.85	0.660	10.41	Volatile
	Revenue	87,945.58	29.53	0.738	15.11	Volatile
Rapeseed-Mustard
	Price	4,523.95	25.24	0.682	14.28	Volatile
	Revenue	62,713.18	32.50	0.747	16.34	Volatile
Soybean
	Price	4,059.42	24.40	0.354	19.67	Volatile
	Revenue	42,051.11	28.56	0.448	21.21	Volatile
Sunflower
	Price	4,199.40	24.32	0.742	12.40	Volatile
	Revenue	38,110.66	39.99	0.867	14.58	Volatile

Source: Calculated by cross-referencing annual yield averages with mandi modal prices. Mean values represent the arithmetic average for the 2011–25 period. Revenue is expressed in INR per hectare (calculated as Price*Yield /100)

Figure 4: Revenue-Earning Potential vs Income Risk (CDVI)

Source: Authors’ own calculations.^[27]

The analysis confirms a structural divide. Cereals offer a low-risk, trend-positive earning model, largely insulated by domestic policy support. Oilseeds, particularly soybean and groundnut, offer higher potential peaks but suffer from random volatility, driven by global market linkages. For the Indian farmer, ‘stable earnings’ are associated with the cereal sector, whereas oilseeds represent an ‘unhedged’ economic venture.

Limited Hedging Against Price Risks and Price-Taker Status

India’s persistent import dependence and its downstream role (importing crude oils for refining rather than influencing upstream production) leave it effectively a price-taker in global edible-oil markets. The combination of 1) heavy reliance on a small set of exporting countries, 2) limited upstream integration into estate-scale plantation or crushing/export positions held by global commodity players, and 3) the absence of substantial trade leverage in any single oil market means that India cannot meaningfully influence benchmark prices on Bursa Malaysia or global oilseed/oil markets. The empirical and institutional record supports the conclusion that India operates as a price-taker with limited bargaining power, constrained to reactive tariff changes and import policy adjustments. This is further attributed to its low import share in overall exports of edible oils (see Table 11).

Table 11: Top Exporters and Importers of Edible Oils

Oil (HS6)	Top Exporters (2023)	Export Qty (Mt)	Top Importers (2023)	Import Qty (Mt)	World Imports (Mt)	Import Share (%)
Palm Oil (151190)	Indonesia	22.5	China	5.6	47.6	11.8
	Malaysia	9.9	Pakistan	2.9		6.1
	Netherlands	0.57	European Union (EU)	2.25		4.7
	Djibouti	0.42	India	2.25		4.7
	Germany	0.29	USA	1.8		3.8
Soy Oil (150710)	Argentina	1.57	India	3.5	11.6	29.9
	Brazil	1.33	Morocco	0.47		4.1
	Russia	0.18	Peru	0.44		3.8
	Paraguay	0.11	EU	0.44		3.8
			China	0.38		3.3
Sunflower and Safflower Oil (Excl. Crude) (151219)	Turkey	0.75	Belgium	0.28	4.00	7.2
	EU	0.38	EU	0.29		7.5
	Ukraine	0.55	Djibouti	0.27		6.7
	France	0.23	France	0.14		3.7
	Hungary	0.26	United States	0.11		2.8

Source: ITC Trade Map Database.^[28]

Price risks in the edible oil sector, driven by global dynamics, affect stakeholders in multiple and asymmetric ways. Farmers face pronounced output-price volatility at the farm gate as international shocks transmit incompletely and with a lag. By-product markets (oil cakes and meal) also fluctuate independently, amplifying income risk for smallholders. Empirical work on international-to-domestic transmission shows partial and asymmetric pass-through in developing country markets: domestic prices tend to fall quickly when international prices decline but rise more slowly when they increase, leaving producers exposed when cost pressures persist.

Processors and traders face import-price volatility and margin risk, as India sources a large share of its crude oils from a few exporting countries. Policy shifts abroad—such as export restrictions or taxes—and changes in freight or freight on board (FOB) prices can sharply alter landed costs. Finally, consumers are vulnerable to the transmission of global shocks into retail food inflation.

In short, the edible oil system exhibits ‘three-way’ price uncertainty—farmers face output and by-product price risk; processors confront import and landed-cost risk; and consumers bear retail price volatility. The asymmetric nature of transmission tends to disadvantage smallholder producers. The exchange rate channel further compounds these pressures. The rupee’s nominal depreciation against the US dollar (see Figure 5) has raised the import bill and widened the current account deficit.

Figure 5: Exchange Rate Trends (2010–25)

Source: RBI Reference Rates.^[29]

During the 2022 global spike in palm and sunflower oil prices, mandi prices for mustard seed rose only modestly (about 5–7 percent), even though global vegetable oil prices increased by more than 25 percent in the same quarter. Processors, however, saw the landed cost of crude palm oil increase by over US$300/tonne within weeks due to Indonesia’s export restrictions. Meanwhile, retail refined oil prices for consumers jumped immediately, demonstrating rapid downstream transmission and slower upstream transmission that leaves farmers most exposed. Figure 6: Price Trends of Oilseeds and Edible Oils (March 2018–February 2026)   Source: DOCA Database[30] Source: Agmarknet Database[31]

Table 12: Trends in Procurement of Major Oilseeds in India

	Groundnut			Sunflower			Soybean			Mustard
Year	Proc	Prod	% Proc	Proc	Prod	% Proc	Proc	Prod	% Proc	Proc	Prod	% Proc
2012–13	0.00	48.95	0	0.00	5.44	0	0.00	146.68	0	0.00	80.29	0
2013–14	3.41	97.14	4	0.04	5.09	1	0.00	118.61	0	0.00	78.77	0
2014–15	0.08	74.02	0	0.04	4.34	1	0.00	103.74	0	0.01	62.82	0
2015–16	0.00	67.33	0	0.04	2.98	1	0.00	85.70	0	0.00	67.97	0
2016–17	2.11	74.82	3	0.06	2.51	2	0.00	131.59	0	0.38	79.17	0
2017–18	10.51	92.53	11	0.00	2.22	0	0.72	109.33	1	8.73	84.30	10
2018–19	7.17	67.77	11	0.03	2.16	1	0.19	132.68	0	10.88	92.58	12
2019–20	7.23	99.52	7	0.05	2.13	2	0.10	112.28	0	8.03	91.24	9
2020–21	2.88	102.44	3	0.03	2.28	1	0.00	128.10	0	0.00	102.10	0
2021–22	1.49	101.35	1	0.01	2.50	0	0.00	129.87	0	0.00	119.83	0
2022–23	0.07	102.97	0	0.08	3.63	2	0.00	149.85	0	11.14	128.43	9
2023–24	0.74	101.80	1	0.08	1.73	5	0.08	130.62	0	10.42	132.59	8
2024–25	18.02	119.42	15	0.17	2.36	7	19.95	152.68	13	5	128.67	4

Source: DA&FW.^[32] Unit: LMT.

Empirical research consistently affirms that agricultural commodity derivatives markets play a pivotal role in price discovery and hedging, offering farmers and other stakeholders transparent, forward-looking price signals. Internationally, countries such as the US, Brazil, China, and Malaysia have developed robust futures markets for oilseeds and edible oils, ensuring transparent price signals, efficient hedging, and greater market stability. In contrast, India remains largely a price-taker in global edible oil markets.

A vibrant commodity derivatives market can also strengthen the oilseed value chain by improving linkages among producers, processors, traders, and exporters; encouraging private investment; enabling warehouse receipt financing; and aligning Indian prices with global benchmarks. Such mechanisms can stabilise supply–demand flows, reduce speculative distortions, and ultimately help lower dependence on edible oil imports, thereby protecting farmer livelihoods and fostering a more self-reliant oilseed economy.

With saturated export markets and reduced global demand depressing oilseed prices and processor margins, farmers face declining realisations. Studies stress that resuming derivatives trading is crucial for providing forward-looking price signals and breaking this cycle.^[33] Encouragingly, some progress is evident. In 2025–26, more than 700 Farmer Producer Organizations (FPOs), representing 1.16 million farmers and traded commodities such as cotton, castor, and turmeric on the National Commodity and Derivatives Exchange Limited (NCDEX), realised prices nearly 10 percent higher than local traders.^[34] Despite these gains, India’s commodity derivatives markets remain underdeveloped. Trading in several key agri-commodities—including mustard, soybean, and palm oil—continues to be suspended by the Securities and Exchange Board of India (SEBI). In the absence of reliable forward prices, farmers remain trapped in a classic cobweb cycle, where production decisions are guided by past price movements rather than future expectations. Consequently, India’s oilseed sector faces chronic income insecurity driven by persistent price volatility, market inefficiencies, weak procurement support, and exposure to global edible oil price fluctuations. Limited access to storage infrastructure and opaque price discovery mechanisms further compels farmers to engage in distress sales, exacerbating income instability.

Pressures from Forward Nodes of Oilseeds Value Chain 

Figure 7: All India Soy Oil Price Trends

Source: Department of Consumer Affairs on the UPAg Portal.^[35]

Indian oilseed farmers today face a steady erosion of bargaining power and profitability as crop prices become increasingly decoupled from production costs and more closely tied to global market volatility. A striking example emerged during the Russia–Ukraine war in 2022, when retail soybean oil prices surged to INR 170/kg, fuelling food inflation for consumers but offering little benefit to farmers, who saw no proportional rise in farm-gate prices (see Figure 7).

Further, when global prices fall, domestic markets tend to depress farm-gate prices quickly; yet, when prices rise, smallholder farmers rarely benefit proportionately due to long, inefficient value chains and their weak negotiating position vis-à-vis traders and processors. This structural imbalance creates a double blow: farmers are penalised in both declining and rising market cycles, further aggravating the income insecurity embedded in oilseed production.

The vulnerability of farmers is compounded by the volatility of by-product markets linked to oilseed processing. By-products such as oilseed cake or meal, which form an important share of farm income, are themselves subject to unpredictable swings in demand and prices, often tied to livestock feed or export markets. This amplification of exposure means that oilseed farmers are not only affected by edible oil price fluctuations but also face risks from dependent markets. The inability to forecast returns with any degree of certainty makes oilseed cultivation a highly precarious venture, deepening the financial fragility of farmers who rely on it as a key source of livelihood. A soybean case study is discussed in the box below.

Soybean Dynamics: Disruption in Oilseed Sector due to Soymeal India produces 11–13 million tonnes of soybean annually (around 4–5 percent of global output). Soybean yields approximately 18–20 percent oil and 40–45 percent protein, supporting a wide range of industries, from edible oil and human nutrition to animal feed, plastics, adhesives, and other industrial applications. The price dynamics of soybean are heavily influenced by its processed products, particularly soymeal, an important source of animal feed globally. Lately, a global glut in soymeal production from Brazil, Argentina, and the US; declining demand from a top importing country, China; and rising availability of Distillers Dried Grains with Solubles (DDGS) from maize and rice as a cheaper alternative to soymeal have depressed domestic soymeal prices. This has weakened the economics of oilseeds, including soybean, groundnut, and rapeseed.[36],[37]

India’s Limited and Concentrated Role in Edible Oil GVCs

India operates primarily at the downstream end of the GVC, importing crude oils for refining and domestic consumption. With limited influence over global pricing, it remains a price-taker vulnerable to international market volatility and geopolitical shocks, such as the Russia–Ukraine war or Indonesia’s 2022 export ban.

Oil Type	India’s Biggest Exporters	Implication for Price Risk
Palm Oil	Indonesia, Malaysia	Highly concentrated suppliers → vulnerability to policy/production shocks in Southeast Asia
Soy Oil	Argentina, Brazil	South American supply risk; freight cost exposure
Sunflower Oil	Ukraine, Russia	Geopolitical risk evident in 2022

While India has untapped potential in value chain associations with non-GMO soybeans, rice bran, cottonseed, and oil palm (with 28 lakh hectares identified for cultivation), its export presence is marginal, constrained by underdeveloped commodity markets, less efficient value chains, and a lack of integration into upstream segments like processing and value-added products (e.g., tofu, soy milk).

Countries like Brazil and the US have leveraged integrated production and advanced processing to dominate the global trade in soybean oil and its derivatives, while Malaysia and Indonesia have built competitive advantages in palm oil through estate-scale cultivation and aggressive value-chain development. India, in contrast, has remained confined to low-value activities, limiting both competitiveness and resilience. The implications of India’s limited GVC role are twofold. First, the economy suffers a substantial foreign exchange outflows each year, while farmers remain vulnerable to volatile global prices that directly transmit into domestic markets. Second, India’s lack of bargaining power leaves it exposed to supply disruptions from a handful of exporting nations.

Asymmetric Effects of Duty Adjustments

India’s edible oil trade policy has been used primarily as a flexible instrument to respond to evolving market conditions, especially during periods of heightened price pressure. The main tool has been adjustments in import duties. These measures have allowed policymakers to respond quickly to inflationary concerns, with a clear emphasis on protecting consumers during episodes of sharp global price increases.

The timing of tariff interventions has often been linked to global disruptions affecting edible oil markets. During 2021–22, duty reductions coincided with exceptional shocks such as the Russia–Ukraine conflict, Indonesia’s palm oil export restrictions, and weather-related supply constraints. In this context, lowering import duties helped moderate the pass-through of international price spikes to domestic retail prices. However, because these adjustments were driven by global developments rather than domestic crop calendars, they sometimes overlapped with peak marketing periods for oilseeds, increasing price sensitivity for farmers during those months.

The experience of the mustard market during 2021–22 illustrates these dynamics. Between October 2021 and June 2022, import duties on crude palm oil were significantly reduced even as global prices remained elevated. This facilitated faster transmission of lower landed import costs into domestic markets, including during the mustard harvest in Rajasthan (a high mustard producer). While the primary objective was to ease pressure on consumers, price signals in domestic mandis softened during the harvest window.

Table 13: India’s Edible Oil Import Duty Trends (2021–24)

Date (W.E.F.)	Crude Palm Oil Duty	Crude Soy and Sunflower Oil	Refined Oils Duty	Remarks
20 August 2021	30.25	38.50	41.25	Pre-tariff cuts: high protection pre-global price spike
14 October 2021	8.25	5.50	19.25	Large cuts to cool inflation ahead of festive season
20 December 2021	8.25	5.50	19.25	Duty cuts continued, refined duty reduced further
13 February 2022	5.50	5.50	13.75	Duty cuts maintained as global prices rise
24 May 2022	5.50	5.50	13.75	Free import approved to contain inflation
15 June 2023	5.50	5.50	13.75	Duty regime maintained into 2023
14 September 2024	27.50	27.50	35.75	Tariff hiked to support farmers

Source: Authors’ own calculations.^[38] Note: % totals include Basic Customs Duty + Agriculture Infrastructure & Development Cess + other levies where applicable.

A similar balancing act was visible in 2024, when import duties on edible oils were raised to support domestic oilseed prices and reinforce production incentives. As market conditions evolved and inflation concerns re-emerged, elements of this stance were subsequently recalibrated. This sequence reflects the challenge of simultaneously addressing consumer price stability and producer remuneration in a market that is highly exposed to global shocks.

Figure 8: Rapeseed and Mustard Oilseed Price Trends (Mar 2021–Feb 2026)

Source: Agmarknet Database^[39]

Overall, the tariff record points to an approach that prioritises responsiveness and adaptability in the face of global uncertainty, with consumer price stabilisation as an important consideration during crisis periods. When viewed alongside external shocks and domestic production cycles, these interventions underline the complexity of using trade policy as a stabilisation tool.

Oilseed-Specific Issues

The oilseed sector in India is inherently diverse, with each crop’s behaviour differing in agronomy, processing characteristics, end uses, and market demand. As primary sources of edible oil, seven oilseed crops—rapeseed and mustard, soybean, groundnut, sunflower, safflower, sesamum, and niger seed—are widely cultivated. Secondary sources include crops like oil palm, coconut, cottonseed, corn, rice bran, and Tree-Borne Oilseeds (TBOs). A list of major edible oil sources is provided in the table below.

Table 14: Major Sources of Edible Oil

Primary Sources	Other classification[40]
Major Oil	Rapeseed and Mustard
	Soybean
	Groundnut
Minor Oil	Sesame
	Sunflower
	Safflower
	Niger Seed
	Oil Palm
	Coconut
	Cottonseed
	Rice Bran
	Corn Oil
	TBOs

Source: Authors’ own using sources as cited.

While there is some degree of interchangeability across oilseeds and their derivative products—such as blending oils or substituting varieties in industrial applications—there is no complete substitutability. This largely reflects differences in culinary traditions, taste preferences, nutritional perceptions, and industrial applications. Consequently, a ‘one-size-fits-all’ approach to policymaking in the sector is likely to yield limited results. Instead, crop-specific strategies are needed to address the unique challenges and opportunities associated with each oilseed.

For instance, groundnut has strong regional consumption preferences in Gujarat and Tamil Nadu, where its oil is considered a premium edible oil. Groundnut and its derivatives encompass a wide range of food and non-food items, including peanut butter, peanut oil, roasted peanuts, peanut cake, groundnut chikki, peanut milk, and industrial products like paint and varnish. India is the second-largest producer of groundnut in the world after China, accounting for 14.28 percent of global production. Despite high production, India’s productivity (1.36 tonnes/ha) remains much lower than that of other big producers such as China (3.71 tonnes/ha), the US (4.49 tonnes/ha), and Argentina (2.27 tonnes/ha).^[41]

Groundnut cultivation employs millions of smallholder farmers, particularly in Gujarat, Rajasthan, Andhra Pradesh, and Tamil Nadu, where production reached about 8.44 million metric tonnes in 2024–25.^[42] The industry contributes to value addition through oil extraction, meal for animal feed, and exports valued at around 680,000 metric tonnes in 2023–24.^[43]

However, the groundnut oil industry faces formidable challenges. Productivity remains low due to the predominance of rain-fed cultivation (over 80 percent of the cultivated area) and vulnerability to droughts and climate variability, which limit yields.

Table 15: Groundnut Yield in India: Actual vs Potential

Yield Type for Groundnut	Value (kg/ha)	Description
Actual Average Yield (2020–25)	1,700	Average yield in India for peanuts (groundnut) over 2020–21 to 2024–25
Potential Yield (Irrigated)	4,000	ICAR-DGR target under irrigated conditions
Potential Yield (Rain-fed)	3,000	National target by ICAR-DGR

Source: ICAR-DGR^[44]

Groundnut is also vulnerable to aflatoxin contamination, resulting from improper storage and handling, which poses health risks and creates barriers for exports. Fluctuating prices, high input costs for seeds and fertilisers, and competition from cheaper imported oils like palm and soybean, further aggravate market instability. Supply-chain inefficiencies, limited access to quality seeds, and inadequate processing infrastructure lead to substantial post-harvest losses, with only a fraction of groundnut output converted into high-quality oil. These challenges are compounded by regulatory hurdles related to quality standards and labelling.

Similarly, while the area under soybean cultivation has risen from 64.17 LHa in 2000–01 to 132.55 LHa in 2023–24, more than doubling over the 24-year span, the yield has not mirrored this trend. Yield increased from 823 kg/ha in 2000–01 to a peak of 1,353 kg/ha in 2012–13, after which it experienced volatility, ultimately declining to 985 kg/ha in 2023–24^[45]. India’s soybean yield is the lowest among the top soybean producers in the world. Further, its actual yield is also much lower than its potential yield, as reflected in high yield gaps.

Figure 9: Soybean and Its Uses: India vs Others

Source: Our World in Data^[46]

However, Indian soybeans are naturally non-GMO, a premium trait in high-value markets like Europe, Japan, and potentially China. Most global exports (from Argentina, Brazil, and the US) are GMO-based, giving India an untapped market edge. Globally, non-GMO soy fetches 10–20 percent price premiums due to consumer health concerns and labelling regulations.^[47]

Further, soybean has a wide range of high-value derivative products, including tofu, soy milk, and textured vegetable protein, which face strong and rising demand in East Asian markets such as China, Korea, and Japan, as well as among vegan consumers. Lately, soybean has also emerged as an important source of nutrition for both humans and animals, providing high-quality protein with minimum saturated fat. About 250g of soybean is equivalent to 3 litres of milk or 24 eggs. Further, soy oil is also rich in Omega-3 and -6 fatty acids. Globally, soybean is increasingly being used in processed products. However, in India, most of soybean goes into animal feed with a declining share of processing (see Figure 9).

Case Study of Brazil: From Net Importer of Soybean to Soybean Powerhouse Brazil is the world’s largest soybean producer, with an annual output exceeding 150 million metric tonnes. Average yields are about 3.4 t/ha, supported by the adoption of GMO and herbicide-tolerant seeds; large-scale mechanised farming, state-supported R&D through EMBRAPA (Brazilian Agricultural Research Corporation), and sustainable practices in the Cerrado region, such as no-till farming. Integration with GVCs: Along with strides in production, Brazil exports 70 percent of its soybean output primarily to China, the EU, and the Association of South East Asian Nations (ASEAN). Brazil has been able to integrate its soybean ecosystem across the value chain, encompassing production (large commercial farms), processing (crushing units near ports), logistics (dedicated rail and port corridors), and trade finance (via commodity giants like Cargill, ADM, and Bunge). Finally, strong public-private coordination has facilitated alignment with sanitary, traceability, and sustainability standards demanded by international buyers. Net Impact Summary Indicator 1990s 2023 Soybean Production[48] 19.89 million tonnes 152.14 million tonnes Average Yield[49] 1.7 t/ha 3.4 t/ha Export Value[50] USD 957 million USD 51 billion Export Markets EU, small Asian countries China (80%+), EU, ASEAN Note: The export value figure for 1990 pertains to the year 1995. India’s own non-GMO niche, combined with smart logistics and value-added export strategies, can help replicate this success—especially in soy, groundnut, and castor.

Figure 10: Oil Yields by Crop Type

In comparison with oilseed crops like soybean and groundnut, oil palm exhibits very different dynamics. It offers high yield potential but comes with a 4–5-year gestation period and is concentrated in specific agro-climatic zones. Globally, palm oil is the most traded and consumed edible oil, accounting for over 35 percent of total global vegetable oil trade. With yields higher than other oilseed crops (see Figure 10), a long productive life (typically over 25 years), and consistent harvesting cycles, oil palm provides a reliable source of edible oil. Its cost competitiveness and usage versatility across food, cosmetics, and biofuels make it a vital commodity in global trade.

Of the total 78 million metric tonnes of palm oil produced globally, 60 percent and 25 percent come from Indonesia and Malaysia, respectively.^[51] These countries also dominate the global exports, supplying to the biggest importers such as India, China, and the EU. India alone imports 8–9 million tonnes annually, making it the world’s largest importer of palm oil. For India, this continued dependence exposes the country to geopolitical and supply-chain shocks, as seen during the Indonesia export ban in 2022.

This seems paradoxical, since India has vast untapped potential for domestic palm cultivation. The Indian Institute of Oil Palm Research, in its study, has identified 28 lakh hectares as a potential area for oil palm plantations in 22 states of the country, including the Northeastern states.^[52] At present about 6 lakh-hectare area is under oil palm cultivation, leaving ample scope for further expansion in the country.

As far as other secondary sources are concerned, rice bran oil and cottonseed oil industries are worth exploring.

Cottonseed Oil

Cottonseed oil represents one of India’s most important secondary edible oil sources, derived as a by-product of cotton cultivation. Although cotton is primarily grown for fibre, cottonseed accounts for nearly two-thirds of the total biomass of the cotton plant and offers substantial potential for augmenting domestic edible oil availability. Historically, cottonseed oil production in India dates back to the early twentieth century, with the establishment of the first cottonseed oil mill at Navsari in 1914. Annual cottonseed oil production is estimated at 1.3–1.4 million tonnes, accounting for a large share of the indigenous edible oil basket. Consumption is geographically concentrated in cotton-producing states, particularly Gujarat, where the oil is preferred for its high smoke point and suitability for deep frying and food processing applications.

Despite its long presence, the sector continues to face structural, technological, and market-related constraints that limit its full contribution to national edible oil self-sufficiency. 

Processing Structure and Technological Constraints:

Cottonseed oil in India is extracted through two broad processing routes: direct crushing and scientific processing. The majority of cottonseed is processed through direct crushing of ginned, un-decorticated seeds in mechanical expellers. While this method is widely adopted due to its simplicity, low capital requirements, and assured market for un-decorticated cottonseed cake as cattle feed, it is technically inefficient. A substantial proportion of oil remains trapped in the cake, leading to lower oil recovery and suboptimal resource utilisation.

Scientific processing, by contrast, involves de-linting and dehulling or decortication, followed by oil extraction using expellers and/or solvent extraction methods. This approach enables higher oil recovery and generates valuable co-products such as cotton linters, a high-purity form of cellulose, and de-oiled cake with higher protein and lower fibre content. Despite these advantages, scientific processing has not gained wide adoption in India. High initial investment costs, increased operating expenses, limited domestic demand for linters, and weak acceptance of de-oiled cottonseed meal by dairy farmers have constrained the diffusion of advanced processing technologies.

Concerns related to genetically modified cotton, pesticide residues, and refining standards have also influenced consumer perceptions, necessitating stricter quality assurance and regulatory compliance. These factors increase compliance costs for processors while simultaneously affecting consumer trust and market expansion.

Despite these challenges, cottonseed oil holds considerable untapped potential. Industry estimates suggest that with wider adoption of scientific processing, India’s cottonseed oil production could reach about 1.8 million tonnes annually, representing nearly a 50 percent increase over current levels. Such gains could be achieved without expanding cotton acreage, solely through improved processing efficiency and value recovery^[53][54]

Rice Bran Oil (RBO)

RBO occupies a strategically important position in India’s edible oil landscape as a value-added by-product of rice milling. Given India’s status as the world’s second-largest producer of rice, RBO represents a substantial yet underutilised domestic resource for enhancing edible oil self-sufficiency. Extracted from the outer layer of the rice grain, RBO is recognised for its favourable fatty acid profile, high smoke point, and the presence of bioactive compounds such as oryzanol, tocopherols, and tocotrienols, which have contributed to its growing acceptance among health-conscious consumers.

India produces approximately 9–10 million tonnes of rice bran annually, of which nearly 60–65 percent is theoretically oil-bearing. However, only about 5 million tonnes of rice bran are currently processed, resulting in an annual RBO production of around 1.2–1.6 million tonnes.^[55] This indicates that less than half of the available rice bran is effectively utilised for oil extraction, leading to significant foregone domestic edible oil output.

RBO is classified as a ‘secondary source’ edible oil, similar to cottonseed oil, but its potential contribution to edible oil self-sufficiency is comparatively larger due to the scale of rice cultivation and milling operations across the country.^[56] Despite these constraints, the growth prospects for RBO in India are substantial. The global RBO market was valued at US$6.8 billion in 2024 and is projected to reach US$12.1 billion by 2031, growing at a CAGR of 7.3 percent.^[57],^[58]

If existing rice bran availability were fully utilised, India could potentially produce over 2.5 million tonnes of RBO annually, enhancing domestic edible oil supply. Technological interventions such as decentralised stabilisation units, energy-efficient extrusion systems, and improved logistics integration between rice mills and oil extractors could unlock this potential.

RBO production also contributes to rural value addition by transforming an agricultural by-product into a high-value edible oil, generating employment and income across the rice value chain.

Processing and Technological Challenges:

A defining challenge in RBO production is the rapid deterioration of raw rice bran due to the activity of lipase enzymes. Once rice is milled, lipase initiates the hydrolysis of triglycerides, causing a rapid increase in free fatty acid (FFA) content within a few hours. Elevated FFA levels reduce oil recovery and increase refining losses, thereby raising production costs and lowering profitability.

To mitigate this problem, bran stabilisation technologies—such as heat treatment, extrusion, or chemical stabilisation—are required immediately after milling. However, the adoption of stabilisation infrastructure remains limited, particularly among small and medium rice mills, due to high capital costs and energy requirements. As a result, a large proportion of rice bran is diverted to low-value uses such as cattle feed rather than oil extraction. Additionally, the refining of RBO is more complex compared to other edible oils because of its higher wax and gum content. This necessitates advanced refining technologies, further increasing operational costs and acting as a barrier to entry for new processors.^[59]

Repositioning Edible Oils: From Passive Price-Taking to Strategic Value Creation

The sectoral dynamics of edible oils today are heavily influenced by supply-side factors such as agricultural practices, climate conditions, and geopolitical developments, especially in leading producing countries. The recent supply-chain disruptions on account of the COVID-19 pandemic and the Russia–Ukraine war testify to the sector’s volatility. Further, countries like Indonesia and Malaysia (the large producers of palm oil) are increasingly diverting palm oil to the production of biodiesel, thereby creating a void in the palm oil markets.^[60]

On the demand side, global vegetable oil consumption for food is anticipated to grow around 3 percent annually, fuelled by population growth, urbanisation, rising incomes, and dietary shifts, especially in developing economies like China and India.^[61]

These developments, along with the existing challenges, present not only strategic risks but also potential opportunities waiting to be capitalised on. The emerging strategy for the oilseed sector is increasingly shifting towards an outward-looking approach that seeks deeper integration with GVCs, in contrast to the inward-looking model traditionally followed. For such a strategy to succeed, however, an enabling ecosystem is essential—one that ensures predictability and stability through rule-based trade policy rather than knee-jerk responses, safeguards the interests of small and marginal farmers to prevent their exclusion from the benefits of global integration, and complements these measures with supportive actions such as investment in research and development, infrastructure strengthening, risk management mechanisms, and promotion of sustainable production practices. The following section therefore sets out specific policy prescriptions aimed at translating these opportunities into concrete avenues of growth and prosperity for India’s oilseed sector.

1. Crop-Specific Interventions 

1) Building Processing Infrastructure and Brand Repositioning RBO and Cottonseed Oil

Achieving fuller utilisation of RBO and cottonseed oil will lead to a systematic integration of secondary edible oil sources into India’s self-sufficiency framework. A core strategic priority should be the modernisation of processing infrastructure through focused capital support for rice bran stabilisation units and scientifically designed cottonseed processing plants. A dedicated incentive for decentralised rice bran stabilisation at or near rice mills and for de-linting–decortication–solvent extraction systems in cotton-growing regions could substantially improve oil recovery rates without increasing cultivated area. Such investments would directly address technological inefficiencies, reduce post-harvest losses, and enhance value realisation from existing agricultural output.

Equally important is strengthening supply chain integration and market development. The NMEO framework could facilitate structured linkages between rice mills, oil extractors, and refiners to ensure timely bran collection and stabilisation, thereby mitigating lipase-induced degradation in rice bran. Parallel consumer-side interventions—such as quality certification, awareness campaigns on functional and health attributes, and the inclusion of rice bran and cottonseed oils in public procurement and institutional feeding programmes—can expand demand beyond traditional markets and improve price stability.

Finally, the strategic utilisation of RBO and cottonseed oil must be embedded within the broader goals of import substitution, rural value addition, and environmental sustainability. Since both oils are derived from agricultural by-products, their expansion aligns with resource efficiency and circular economy principles while minimising land-use trade-offs. A coordinated approach that combines technology deployment, policy incentives, and market facilitation can enable these secondary oils to collectively contribute several million tonnes of additional domestic edible oil, thereby strengthening India’s resilience to global price volatility and advancing long-term edible oil self-sufficiency.

2) Sharpening Focus on Derivative Products and Developing Supply Chains for Groundnut 

Promoting high-yield, drought-resistant groundnut varieties and expanding micro-irrigation can boost yields by 20–30 percent, while FPO-led cluster farming ensures stable supply chains.^[62] Modernising processing through solvent extraction and cold-pressing units, alongside improved aflatoxin control technologies, can increase oil recovery and output. Developing organic and fortified groundnut oil, branded as heart-healthy, taps into the global organic oil market and urban India’s growing health consciousness. Export potential to the US and the EU, where organic oil demand is substantial, can be unlocked with quality certifications and Agricultural and Processed Food Products Export Development Authority (APEDA) support.

3) Promoting Value Chain Diversification in Soybean

To capture the broad range of premium derivative products, a targeted domestic value-addition strategy may be adopted. The US has developed a robust export ecosystem for soymeal, tofu, and Textured Vegetable Protein (TVP), while Brazil has expanded soy protein and biodiesel exports. India may incentivise processing infrastructure for tofu, soy milk, and TVP to reduce raw export dependency by launching a soy export strategy targeting tofu and soymeal.

A Soy Innovation Fund could also be established to promote plant-based protein startups, particularly targeting urban and health-conscious consumers, with support through Startup India and MoFPI incubation grants. In parallel, initiatives to promote behavioural shifts in consumption toward soy-based products could help expand the domestic market.

There is also a need to develop a National Certification and Traceability System for non-GMO soymeal exports, which fetch a 15–20 percent premium over GMO meal in the East Asian markets. The India Soy Alliance may also be established with top exporters (e.g., Brazil, Argentina) to shape global norms and hedge against supply risks. This alliance also works towards exploring new export markets. Appointment of agricultural attachés in trade missions will also aid in integrating soymeal/oil promotion into Make in India diplomacy.

4) Towards Sustainable and Health Oil Production

With increasing incomes, there is also increased health consciousness and rising demand for healthy oils and non-GMO products like soymeal, tofu, and tempeh, fetching 10–20 percent premiums in health-conscious markets like Japan, Korea, and the EU. Increased environmental awareness in European countries (the EUDR norms)^[63] for palm oil imports presents an export opportunity for India, which has 28 lakh hectare non-forest degraded land suitable for palm cultivation. To add to this, the recent rise in demand for biofuels globally is also contributing to increased demand for oilseeds

India possesses natural advantages in cultivating non-GMO soybeans, groundnut, mustard, and even oil palm. Trade realignment can make India a value-added exporter while continuing to import raw oils, especially in non-GMO soy oil, RBO, and groundnut oil. As part of a long-term strategy to position itself within the global oil value chain, India must prioritise developing its own sustainability standards. This will not only safeguard market access in high-value export destinations but also enhance India’s credibility as a responsible producer, mitigating concerns over deforestation and environmental degradation.

2. Trade-Side Interventions 

1) A Dynamic but Stable Trade Policy

A sliding-scale import duty system that adjusts based on pre-defined international price triggers and domestic harvesting cycles will act as a counter-cyclical tariff policy that stabilises domestic prices. When international prices fall below a benchmark (e.g., a moving average of past prices or a cost-of-production-plus margin), duties would rise to protect domestic producers from import surges. Conversely, during sharp global price spikes, duties could be temporarily lowered to protect consumers.

2) Recalibrating FTAs

To protect farmers, FTAs should incorporate calibrated tariff safeguards and import-price mechanisms, such as a Minimum Import Price linked to the domestic MSP. This could prevent disruptive dumping via preferential routes like the South Asian Free Trade Area (SAFTA) countries (e.g., Nepal) that lack oilseed capacity while still preserving liberalised access elsewhere. Moreover, renegotiating existing FTAs (e.g., ASEAN–India and India–Malaysia CECA) to selectively phase liberalisation or allow temporary safeguard triggers in times of domestic price stress could help balance competitiveness with farm stability.

3) Developing Special Oil Zones

A dedicated ‘Special Oil Zone (SOZ)’, crafted on the blueprint of India’s successful Special Economic Zones (SEZs), could enhance the export potential of oil and its derivative products. Internationally, petrochemical clusters—like those in Singapore and Korea—have thrived with such frameworks, benefiting from agglomeration economies, shared infrastructure, and export‑led scale. In the Indian context, Andhra Pradesh’s PCPIR‑linked Visakhapatnam SEZ and the Mangalore SEZ operated by the Oil and Natural Gas Company (ONGC)—demonstrate how combining port access, refineries, and petrochemical capacities within a customs‑special enclave can generate high value-chain integration and export capacity.

4) Enhancing Edible Oil Production within Offshore Farming Frameworks

 India can also explore establishing agro-processing hubs for edible oil production in other countries by leveraging a comprehensive model that combines technology transfer, strategic partnerships, and integrated value-chain development, similar to China’s Agricultural Technology Demonstration Centres approach but adapted to India’s specific agricultural expertise. A strong potential is evident for India–Africa cooperation.^[64] India's successful cooperative models, such as Amul, contract farming frameworks, and ICT-based agricultural solutions (e-Choupal), provide proven templates for establishing processing centres that can achieve a 30–60 percent yield improvement, as demonstrated by similar technology transfer initiatives.

3. Deploying Firewalls for Price Discovery and Risk Management 

India’s oilseed sector requires the development of a robust commodity derivatives market where price discovery and risk management function in tandem to protect farmers and strengthen value chains. Such markets, when aligned with MSP, warehousing, and crop insurance, can generate transparent, forward-looking price signals while enabling farmers to hedge against volatility, thereby preventing the cobweb cycle of boom-bust production. Resuming commodity trading in key oilseeds and expanding participation of the FPOs can provide farmers with reliable price benchmarks, reduce speculative distortions, and stabilise incomes.

4. Reforming Agricultural Incentives to Internalise Negative Environmental Externalities

Transition from crop-specific input subsidies (often skewed towards grains like paddy and wheat, leading to resource imbalances) to climate-resilient, crop-neutral, and outcome-based incentives should lead to desirable outcomes like improved water-use efficiency, enhanced soil health, increased carbon sequestration, and biodiversity promotion. Instead of subsidising electricity or fertilisers, which encourages their overuse, DBTs or payments for ecosystem services could be provided to farmers who adopt verifiable sustainable practices.

Conclusion: Towards a Resilient and Integrated Oilseed Economy

India’s edible oil sector currently operates under a ‘three-way’ uncertainty, where farmers, processors, and consumers remain vulnerable to the volatile ebbs and flows of the global market. This study has demonstrated that while domestic production has achieved high growth, a structural ‘stability divide’ persists between the heavily supported cereal sector and the largely ‘unhedged’ oilseed sector. The weakest link in this system remains India's smallholder oilseed farmers, whose livelihoods are intrinsically linked to global edible oil price movements and the structure of domestic agricultural policy. The current model of passive price-taking, characterised by high import dependence (56 percent) and asymmetric price transmission, is no longer sustainable for a nation aspiring towards agricultural self-reliance.

Additionally, India lacks influence on global commodity exchanges like Bursa Malaysia or the Chicago Board of Trade, where benchmark prices for palm and soybean oil are set. It also has little control over external factors such as export restrictions by producing countries, adverse weather in South America, or geopolitical disruptions like the Russia–Ukraine conflict. While India can tweak import duties or provide domestic incentives, these are reactive tools that do not influence global price trends.

To transition from a vulnerable importer to a strategic global player, India must move beyond traditional ‘production-only’ missions. Going forward, greater predictability—such as clearer signalling on the conditions under which tariffs may be adjusted—could complement this flexibility and help align short-term market management with the longer-term objective of strengthening domestic oilseed production. This paper advocates for a three-pillar strategic reorientation:

1. GVC Integration and Value Creation: Rather than pursuing mere import substitution, India should leverage its unique non-GMO niche to become a value-added exporter of high-value derivatives like soy protein, tofu, and heart-healthy oils.
2. Institutionalised Risk Management: The ‘random-volatility’ inherent in rain-fed oilseed cultivation requires more than just MSP; it necessitates the implementation of ‘sliding-scale’ tariffs and price-triggered firewalls to protect domestic producers from international shocks.
3. Harnessing Secondary Potentials: Fully utilising under-tapped resources like rice bran and cottonseed oil through modernised scientific processing could add millions of tonnes to the domestic basket without requiring additional land—critical in a land-saturated economy.

By integrating these strategies, India can reposition itself within the global value chain, not just as a consumer, but as a resilient, competitive, and farmer-centric oilseed powerhouse. The path to self-sufficiency lies in transforming the edible oil challenge from a structural vulnerability into a global market opportunity. This ‘Yellow Revolution 2.0’ is outward-oriented, brand-driven, and rooted in global demand cues.

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Rishi Kant is an Indian Economic Service (IES) officer of the 2012 batch. Currently, he is director in the Department of Agriculture & Farmers’ Welfare, Government of India. 

Parul Jain is an IES officer of the 2021 batch, currently posted as deputy director in the Department for Promotion of Industry and Internal Trade, Ministry of Commerce & Industry, Government of India. 

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All views expressed in this publication are solely those of the authors, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

Endnotes

• Energy
• International Trade and Investment
• India
• agricultural resilience
• biofuel demand
• crop diversification
• edible oil demand
• export competitiveness
• farmer income
• Global Value Chains
• import dependence
• MSP policy
• nutritional security
• oilseeds India
• price volatility
• production gap
• rain-fed agriculture

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