India wants cheaper cooking oil imports and sustainable sourcing. Can it have both?

India wants to make cooking oil affordable for consumers while making its palm oil supply chain more sustainable. The problem is that doing both could raise costs in a market where imports already meet a large share of domestic demand.

The issue has become more pressing as edible oil prices have risen sharply and the government has again turned to import duties to contain the impact on consumers.

On September 24, the government cut the basic customs duty on crude sunflower oil to zero from 10 per cent. The duty on crude palm oil and crude soybean oil was reduced to 5 per cent from 10 per cent.

The government said the move was aimed at moderating domestic edible oil prices and containing inflationary pressures. It also retained a 19.25 percentage point duty difference between crude and refined edible oils to support domestic refining.

Vegetable oil prices in India had risen nearly 20 per cent over the previous year. India meets about two-thirds of its edible oil requirements through imports, making domestic prices vulnerable to global prices, currency movements and supply disruptions.

Speaking to Firstpost in an interview, former Commerce Secretary Rajeev Kher said this dependence means edible oil needs to be viewed as a strategic commodity rather than simply as a product that can be imported whenever domestic supplies fall short

More from Business

“We need to take a strategic perspective on edible oil because we are, for a variety of reasons, dependent on imports,” Kher, who is now Senior Advisor, Soft Commodities at WWF-India, told Firstpost.

“A commodity as sensitive as edible oil, particularly for a country which is 60 per cent dependent on imports, makes a lot of sense to be treated as a strategic commodity rather than something to be imported when you are short.”

India’s palm oil dependence

India’s import dependence is visible in the composition of its edible oil basket.

The country imported 16.07 million tonnes of edible oils in 2024-25, according to government data. Palm oil accounted for 7.52 million tonnes, or 46.77 per cent of total edible oil imports.

India is also the world’s largest importer of vegetable oils. Imports are particularly important for palm oil, soybean oil and sunflower oil, with supplies coming from countries including Indonesia, Malaysia, Argentina, Russia and Ukraine.

Imports are expected to remain important in the near term. Reuters reported in July that India’s edible oil imports could average about 1.5 million tonnes a month between July and October as domestic supplies tightened ahead of the festive season.

That leaves policymakers with a difficult balance.

Lower import duties can reduce the landed cost of edible oil and provide some relief to consumers. But cheaper imports can also put pressure on domestic oilseed farmers.

At the same time, moving towards more sustainable palm oil sourcing can involve certification, traceability and changes across the supply chain. Those costs can eventually reach manufacturers and consumers.

“The moment you talk about sustainability, you are talking about a framework of regulatory compliances,” Kher said.

“Regulatory compliances would straightforwardly mean costs because you will create infrastructure, you will create practices, you will create skills, you will create a human resource component.”

Sustainability comes with a cost

The sustainability challenge is particularly relevant for palm oil because India is such a large buyer.

Certification systems such as those operated by the Roundtable on Sustainable Palm Oil require supply-chain controls and traceability for certified palm oil products. The organisation’s updated sustainability standards became applicable from June 2026, while its supply-chain certification framework is also being reviewed.

For companies, adopting such systems can mean additional spending on sourcing, verification, documentation and supply-chain management.

Kher said the cost ultimately has to be absorbed somewhere.

“Economic entities are not doing all this for the love of it. They are there to make money, so the costs will go down. They will percolate down to the consumer.”

That creates a tension for India.

The country wants consumers to have access to affordable cooking oil. At the same time, it has committed to sustainability goals and is under growing pressure to ensure that imported commodities meet higher environmental standards.

Kher said policy therefore needs to be introduced gradually rather than through an immediate blanket requirement.

“The policy instruments will have to be graduated. You cannot suddenly say that all palm oil, for example, will come into this country which is certified.”

But he also argued that sustainability cannot be treated as an issue only for imported palm oil.

“You should have sustainable palm oil because you are committed as a country to sustainability,” he said.

“You cannot have an approach that says I will produce sustainably inside the country, but I will not be bothered about what is coming from outside. You will have to have a uniform approach.”

More domestic production is part of the answer

Reducing India’s exposure to global edible oil prices will ultimately require higher domestic production.

The government has set a target of increasing primary oilseed production from 39 million tonnes in 2022-23 to 69.7 million tonnes by 2030-31 under the National Mission on Edible Oils-Oilseeds.

Together with the oil palm mission, the government aims to raise domestic edible oil production to 25.45 million tonnes by 2030-31, which it says could meet around 72 per cent of projected domestic requirements.

There has already been some improvement in oilseed production. Government data shows oilseed production rose from 39.67 million tonnes in 2023-24 to an estimated 43.06 million tonnes in 2025-26.

The oil palm programme is another part of the strategy.

The National Mission on Edible Oils-Oil Palm was launched in 2021 to expand oil palm cultivation, with a particular focus on the northeastern states. Government data showed total oil palm coverage had reached 6.2 lakh hectares by November 2025, while crude palm oil production rose to 3.8 lakh tonnes in 2024-25.

But increasing domestic output will take time.

“There are four straightforward answers. One is to increase domestic production. Two is to increase the productivity of domestic production. Three is to diversify imports so that dependence on a limited number of importing countries is reduced. Four is to broaden the basket of edible oils.”

Can India diversify away from palm oil?

Diversification could reduce some of the country’s dependence on palm oil and its major suppliers.

Kher pointed to edible oils that have traditionally been part of India’s consumption patterns but have become less prominent.

“If I go back to my childhood, sesame oil was a routine sort of consumption in those days. Now I don’t think your generation is looking at sesame oil at all,” he said.

A broader basket could include greater use of domestic oilseeds and alternative edible oils where economically and culturally viable.

But diversification alone will not remove India’s dependence on imports. Domestic consumption has grown faster than production for years, while India’s large population and expanding food processing sector create sustained demand.

That means imports will remain an important part of the market even as domestic production expands.

India has bargaining power

Kher believes India’s size as an importer gives it an advantage when negotiating the terms of sustainable sourcing.

“India’s biggest advantage today is the positional advantage of being a large importer. You are a demander, you are a market.”

That market power could be used to encourage suppliers and domestic companies to adopt sustainability standards without immediately imposing the full cost on consumers, he said.

But awareness has to come first.

“The first step is awareness. Start talking about it. Today, nobody is talking about it. You have to create a situation that every stakeholder, and not just those who are involved in transactions, starts talking about it.”

He said the government could use a mix of incentives and policy measures rather than relying only on regulation.

“You can create economic incentives. You can create behavioural incentives. You can simply drive a differentiated policy instrument. You can support some sectors and not support other sectors.”

From compliance to competitiveness

For India, the bigger question may be whether sustainability can eventually become an economic advantage rather than simply another cost.

Kher said sustainable sourcing should be connected with India’s ambitions as an exporter of processed food and other products.

“Your export competitiveness has to be dovetailed with your sustainability practice,” he said.

“Sustainability practice adoption is not a compliance issue alone. This issue, the sustainability practice, has to generate export competitiveness.”

That could require changes beyond certification.

For example, improving port and customs efficiency could help offset some of the additional cost associated with sustainable sourcing.

“The longer my oil is spending on the port, the more cost I am bearing,” Kher said. “If you allow me faster clearance, I save hundreds and thousands of rupees. If I save that money there, I can incur the cost of sustainable certification.”

That approach would also recognise that India’s edible oil market is not made up only of large food companies.

“The stakeholder is not a uniform or harmonious group of people,” Kher said. “There is a small samosa seller sitting at a corner shop and there is a Unilever or Godrej importing oil worth thousands of crores. That is the difference.”