Cooking oil price to increase: Prices of cooking oil are set to soar in India as a result of the ongoing crisis between the two top producers and exporters of sunflower oil — Russia and Ukraine. A war between the two nations will create a supply crunch in the market, leading to even higher prices. India will be hit harder than others as 90 per cent of the country’s sunflower oil imports are from Russia and Ukraine.
As per the Commerce Ministry data, India consumes around 2.5 million tonnes (mt) of sunflower oil annually but it only produces 50,000 tonnes of sunflower oil and imports the rest.
Sunflower oil accounts for 14 per cent of all edible oil imports. It is the fourth most consumed edible oil, after palm (8-8.5 mt), soyabean (4.5 mt) and mustard/rapeseed (3 mt). The price of sunflower oil rose from `98 a litre in February 2019 to `161 February 2022.
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India’s sunflower oil imports is 2.5 mt in 2019-20 (April-March) and 2.2 mt in 2020-21, valued at $1.89 billion and $1.96 billion, respectively. From Ukraine it imports 1.93 mt (worth $1.47 billion) in 2019-20 and 1.74 mt ($1.6 billion) in 2020-21, with Russia it imports around 0.38 mt ($287 million) and 0.28 mt ($235.89 mt).
Hefty Import Bills
Roop Bhootra – CEO, Investment Services, Anand Rathi Shares and Stock Brokers, said: “Higher oil prices are always a risk factor for India which has a large import bill. However, current move in oil prices are mainly due to Ukraine crisis and should cool off in some time. Also, incremental ethanol blending for which Government is pushing very aggressively should also help in cushioning some impact in medium term.”
Edible Oil Prices on a Rise
Edible oil prices have been climbing unabated globally and in India since the onset of the pandemic. The climb has been so steep that the Indian government had to take several measures to rein in the increase in prices.
Reasons for Unabated Price Rise
In 2021, unfavourable weather conditions in major oil-exporting countries like Malaysia, Indonesia, Ukraine, Argentina and Russia, and labour shortage due to the pandemic impacted the production of edible oil.
Soyabean oil prices soared last year on the back of dry weather conditions in the largest exporter Argentina and high demand from India and China. Sunflower oil prices rose due to drought-like conditions in Russia and Ukraine.
Government’s Quest to Control Oil Prices
The fall in exports pushed prices higher. To curb the rise in prices, the government slashed import duty on edible oil several times last year.
“The government slashed prices six times in 2021, and now practically duty is only 5.5 percent,” B.V. Mehta, Executive Director of Mumbai-based Solvent Extractor’s Association of India, told Moneycontrol.
The government also announced an investment of Rs 11,040 crore to boost the cultivation of palm oil under the National Mission on Edible Oils – Oil Palm. The government measures stemmed the rise in prices as top companies operating in the segment, such as Adani Wilmar (Fortune) and Marico (Saffola), passed on the benefit to the consumers.
However, these efforts went into vain as the global sunflower oil prices were soaring even before Russia announced its intention to send its troops to Ukraine. The landed price of imported crude sunflower oil in Mumbai (cost plus insurance and freight) on February 23 stood at $1,630 per tonne as against $1,500 a week ago. A year earlier, the price was $1,400.
The Sunny Side
On the positive side, Indian farmers are likely to get better prices for their mustard produce from the mid-March harvest. At Rajasthan mandis, mustard is currently quoting at Rs 6,700-6,800 per quintal, which is higher than the government’s minimum support price of Rs 5,050.
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