Why Cooking Oil Prices Are Soaring in India: A Closer Look

Most food prices in India have remained stable this year. Edible oils, however, have sharply bucked that trend. Sunflower oil alone is up by 18%. The reasons behind these increases are largely global.

Earlier this August, the Minister of State for Food and Consumer Affairs informed Parliament that pulses and cereals have remained steady. Rice and wheat have seen only slight increases, thanks to a record harvest and robust government reserves. Potatoes, onions, and tomatoes have been subject to their typical seasonal price changes.

Edible oils, however, stood out as an exception. Prices jumped significantly, and the government acknowledged that there is only so much it can do. Oil prices, it emphasized, are highly sensitive to global market fluctuations.

So why are edible oil prices diverging so sharply from other staples?

Cooking Oil Price Increases: Key Numbers

According to the minister’s report to Parliament, here are the figures:

By comparison, pulses have seen much milder increases: urad dal rose by 5.46%, and most other pulses by just 2–3%. Edible oil prices are clearly outpacing all other essentials. Unlike vegetables such as tomatoes or onions, which typically see prices fall with the next harvest, the spike in oil prices shows no obvious end—because it is driven by factors far beyond India’s borders.

India imports more than half of its cooking oil.

Only 44% of the cooking oil India consumes is produced domestically; the remainder is imported, making India the world’s largest importer of vegetable oil. This means that prices on local shelves depend much more on international decisions than on the actions of Indian farmers.

India’s edible oil imports are diverse. Most palm oil is sourced from Indonesia and Malaysia, soybean oil from Argentina and Brazil, and sunflower oil from the Black Sea region—where Russia has recently surpassed Ukraine as the main supplier. In the first quarter of 2026, Indonesia contributed 22% of India’s edible oil imports by value, with Malaysia and Argentina close behind.

This heavy reliance on imports makes India vulnerable to disruptions abroad. A poor soybean harvest in Argentina, shipping delays from the Black Sea, or an export ban from Indonesia can all rapidly translate into higher prices for Indian consumers. This is what officials mean when they say prices are “sensitive to world markets.”

One important but often overlooked factor is that more edible oil is now being diverted into fuel tanks, rather than kitchens.

Weather and geopolitical conflict are typically cited as reasons for high palm oil prices. This year, however, another factor is at work—one that is seldom highlighted in price reports.

Indonesia and Malaysia—India’s main palm oil suppliers—have started diverting more of their oil to produce biodiesel for domestic fuel. In 2026, Indonesia raised its biodiesel mandate to B50, meaning that half of its blended diesel is now palm oil-based, up from 40% the previous year. Malaysia is similarly increasing its mandate from B10 toward B15.

The effect is direct: palm oil used as fuel in Indonesia is unavailable for export as food oil. The Reserve Bank of India noted in its July 2026 Bulletin that rising edible oil prices are partly attributable to this diversion, particularly after Indonesia’s jump from B40 to B50. When oil producers prioritize fuel over food, India—as the world’s largest buyer—feels the impact first.

There is another dimension to consider: Indonesia is pushing palm oil into biodiesel to reduce its reliance on imported petroleum. Since India imports both crude oil and cooking oil, such policies affect Indian consumers twice—at the petrol pump and in the grocery store.

The Indian government has already used its primary available tool to address the issue.

New Delhi has not remained passive, but its options are limited. In May 2025, the government cut the basic customs duty on crude palm, soy, and sunflower oil from 20% to 10%, lowering the effective duty from 27.5% to 16.5%. The intent was clear: to make imported oil cheaper and thereby lower prices for Indian households.

Refiners responded to the reduced duties: India’s edible oil imports hit a ten-month high of 1.49 million tonnes in July 2026, with palm oil imports rising 50% in that month alone. However, there are clear limitations. Lower tariffs only help if oil is available for export. As more oil is diverted to biofuel domestically in Indonesia and Malaysia, less is left for export to India—regardless of duty rates.

Why Cooking Oil Imports Keep India Vulnerable

India does have a long-term strategy. The National Mission on Edible Oils aims to double domestic production to approximately 25.5 million tonnes by 2031, primarily through expanded acreage and greater oil palm cultivation. However, this solution is years away, and with the 2026 monsoon forecast to be the weakest in eight years, there is little immediate relief in sight.

For the moment, India’s dependence on a small group of supplier countries for a basic staple means that prices are dictated by global events. As long as these countries find higher profits in selling oil for fuel, Indian households will continue to feel the effects—until domestic production can close the gap.

The minister’s warning about global markets is well founded. Ultimately, India’s dependence on these markets will determine the stability of prices at home.

Sources: Economic Times (Parliament statement, Aug 2026); Reserve Bank of India July 2026 Bulletin; Solvent Extractors’ Association of India; TradeInt Q1 2026 import data; ORF; CME Group; Business Standard; Government of India customs notification (May 2025).