India’s edible oil industry is grappling with a challenging operating environment as rising global vulnerabilities and persistent domestic structural constraints drive up import costs, increase price volatility and expose the sector to heightened geopolitical and currency risks, according to a report by CareEdge Ratings.
The rating agency noted that the sector is likely to face continued pressure over the near to medium term due to global supply tightness, expanding biofuel mandates, geopolitical uncertainties and rupee depreciation, all of which are contributing to elevated input costs and earnings volatility.
Import dependence remains a key concern
Despite being a major producer of several traditional edible oils, India continues to face a significant demand-supply imbalance. The country’s edible oil consumption stood at around 28.5 million tonnes in OY2025, while domestic availability was estimated at only 12.5 million tonnes, meeting just 44% of total demand.
As a result, India imported nearly 16 million tonnes of edible oils during the year, resulting in an import bill of approximately ₹1.61 lakh crore.
The report highlighted that India’s edible oil imports remain heavily concentrated across a limited number of countries. Around 84% of palm oil imports originate from Indonesia and Malaysia, while Argentina and Brazil account for 86% of soybean oil imports. Similarly, nearly 80% of sunflower oil imports are sourced from Russia and Ukraine.
This concentration leaves the country vulnerable to supply disruptions, trade restrictions and geopolitical tensions in key producing regions.
Prices rise amid global disruptions
Edible oil prices have been on an upward trajectory since late OY2025 and accelerated further in OY2026 due to global supply disruptions, higher biofuel demand and concerns over weather-related risks such as El Niño.
The depreciation of the Indian rupee further amplified domestic inflationary pressures, resulting in edible oil prices rising by 14% to 16% during the last seven months of OY2026.
While prices remained relatively subdued during the early part of FY26 due to duty reductions, easing inflation and improved supply conditions, the second half of the year witnessed sharp increases driven by global developments.
Consequently, profitability across the edible oil sector is estimated to have come under pressure during FY26.
Thin margins continue to challenge the sector
The report observed that the edible oil industry continues to operate on thin margins due to the largely commoditised nature of the business and limited pricing power.
The CareEdge-rated universe, which accounted for aggregate operating income of around ₹50,000 crore in FY25 and represented approximately 17% of India’s ₹2.8 lakh crore edible oil market, recorded only a modest improvement in profitability.
Average profit margins increased from around 3.85% in FY24 to 4.39% in FY25, primarily due to relatively softer edible oil prices during that period.
However, the ability of industry players to pass on rising costs remains constrained, keeping pressure on margins and cash flows.
Domestic production efforts need acceleration
CareEdge Ratings acknowledged that government initiatives such as the National Mission on Edible Oils-Oil Palm (NMEO-OP) provide a long-term roadmap for reducing import dependence.
However, the agency noted that meaningful benefits are likely to materialise only over an extended period due to challenges including long gestation periods, lower yields and competing crop economics.
While oil palm cultivation expanded to 6.2 lakh hectares during 2025-26, achieving 42% of the programme’s target, production reached only 0.39 million tonnes, equivalent to about 14% of the target.
The report emphasised the need to accelerate domestic production and strengthen self-sufficiency initiatives to reduce vulnerability to external shocks.
Credit profiles likely to remain under pressure
CareEdge Ratings said elevated working capital requirements, exposure to commodity price volatility and dependence on imported raw materials are expected to remain key challenges for edible oil processors and refiners.
CareEdge Ratings Director Karthik Raj K said, “In the interim, elevated working capital requirements, exposure to price volatility, and dependence on external supply conditions are likely to keep credit profiles of edible oil processors and refiners under pressure, with any sustained increase in leverage or weakening of coverage metrics remaining key monitorable factors.”
Consumption growth outpaces domestic availability
India remains a global leader in the production of rice bran oil and mustard oil and is among the world’s largest producers of groundnut and cottonseed oils.
However, rising population, increasing income levels, changing dietary habits and greater consumption of processed foods have steadily increased edible oil demand across the country.
Total edible oil consumption has grown at a compound annual growth rate (CAGR) of 3.46% since OY2020, while domestic availability has expanded at a slightly slower CAGR of 3.28%.
The widening gap between demand and domestic production continues to reinforce India’s reliance on imports, making the sector highly sensitive to global market developments and currency fluctuations.
According to CareEdge Ratings, unless domestic production scales up significantly, the edible oil industry is expected to remain exposed to global supply disruptions, elevated price volatility and margin pressures in the coming years.