• In India, Mustard / rapeseed is produced in states of Rajasthan, Uttar Pradesh, Haryana, Punjab, Gujarat, Madhya Pradesh, Jammu and Kashmir, West Bengal, Punjab, Assam, Bihar, Himachal Pradesh & Orissa
• Rajasthan and Uttar Pradesh account for majority share, contributing to over 50% of the total Indian produce that stands at an average of 5 million tons. These areas also have maximum area under cultivation for this crop.
• India’s oilseeds processing sector is made up of the three groups viz Ghanis, solvent extractors and oil refiners engaged separately.   
• Edible oils constitute an important component of Indian households’ expenditure on food. According to NSS 60th Round (January-June 2004), average monthly per capita consumption expenditure (MPCE) of edible oil in food was 8.2% in rural India, and 8.2% in urban India. The share of edible oil has increased in successive NSSO surveys.   
• According to the Second Advance Estimates released by the Ministry of Agriculture on February 5, 2007, total oilseeds production during 2006-07 is expected at 23.62 million tonnes (mt), representing a decline of 15.6% over 2005-06. The decline in oilseeds production is due to lower output of rapeseed, groundnut and castorseed. 

• India is one of the world’s largest edible oil economies with 15,000 oil mills, 689 solvent extraction units, 251 Vanaspati plants and over 1,000 refineries employing more than one million people. The total market size is at Rs. 600,000 Mln. and import export trade is worth Rs.130, 000 Mln.
• India being deficient in oils has to import 40% of its consumption requirements. With an annual consumption of about 11 mln Tonnes, the per capita consumption is at 11.50 kgs, which is very low compared to world average of 20 kgs. China is currently at 17 kg.
•  India is also a leading producer of oilseeds, contributing 8-10% of world oilseed production. India is estimated to account for around 6% of the world’s production of edible oils. Though it has the largest cultivated area under oilseeds in the world), crop yields tantamount to only 50-60% of the world’s average.
• India is the fifth largest producer of oilseeds in the world, behind US, China, Brazil, and Argentina.
• Three oilseeds - Groundnut, Soybean and Rapeseed/ Mustard - together account for over 80 per cent of aggregate cultivated oilseeds output. Mustard seed alone contributes Rs.120, 000 Mln. turnover out of Rs.600, 000 Mln. oilseed based Sector domestic turnover. Cottonseed, Copra and other oil-bearing material too contribute to domestic vegetable oil pool.
• Currently, India accounts for 7.0% of world oilseeds output; 7.0% of world oil meal production; 6.0% of world oil meal export; 6.0% of world veg. oil production; 14% of world veg. oil import; and 10 % of the world edible oil consumption.
• With steady growth in population and personal income, Indian per capita consumption of edible oil has been growing steadily. However, oilseeds output and in turn, vegetable oil production have been trailing consumption growth, necessitating imports to meet supply shortfall.

	01-02	02-03	03-04	04-05	05-06	06-07*
Major Oilseeds
Groundnut	7	4.1	8.1	6.8	8	4.4
Rape/Mustard	5.1	3.9	6.3	7.6	8.1	7.6
Soybean	6	4.7	7.8	6.9	8.3	8.7
Other Six	2.6	2.1	3	3.1	3.6	2.9
Sub-Total	20.7	14.8	25.2	24.4	28	23.6

• Broadly, edible oil/fat products can be categorised into four categories, vegetable refined oil, hydrogenated oil (vanaspati), bakery fats/margarine, and de-oiled cakes.
• The Indian edible oil industry can be classified into the following segments. Ghanis, small.scale expellers, solvent extractors, oil refiners and vanaspati manufacturers.
• Oil mills crush oil seeds and extract oil, 70% of which is sold in the open market. The remaining 30% is refined and sold as branded oil. After the extraction of oil, residual seeds are processed further by solvent extractors, to make solvent-extracted oil. Most of the solvent extracted oil is used to make ‘vanaspati'.
• The Indian edible oil industry is highly fragmented with a large number of small scale producers. The ghanis belong to the SSI segment and usually serve the rural markets.
• Small scale expellers, much like the ghanis, use metal screws to press or expel oil from seeds. However, they are larger than the ghanis, oil expelling capacity being in the range of 5-10 tonnes per day, compared to around 50-60 kilos a day for ghanis.
• Solvent extractors belong to the organised segment and are also the second largest after the SSI segment, in the domestic edible oil industry. They use modern technology to process low oil & high meal seeds (eg.soyabean, cottonseed) into edible oil and de-oiled cake.
• Oil refining also belongs to the organised sector and has recorded rapid growth in recent times. Refiners generally refine both expeller oils and solvent extracted oils.
• Vanaspati is made by hydrogenation of refined oil to vegetable shortening or spread and is similar to the milk product ghee and absorbs around 10% of the total edible oil supply in India.
• Due to increased consumer preference for non traditional oils such as soyabean and sunflower oil, the organised sector has emerged as one of the fastest growing sectors in recent times clocking double digit growth. Branded products, though small portion of the total edible oils market, have been one of the main drivers of rapid growth.

	2004	2010	2015
Total Demand (Mln. Tonnes)	10.9	15.6	21.3
Total Area under Oilseeds (Mln. Hectares)	23.4	28	32
Yield (Tonnes/hectare)	1.07	1.2	1.4
Production of Oilseeds (Mln. tonnes)	25.1	33.6	44.8
Domestic supply of edible oils (Mln. tonnes)	7	10.1	13.4
Total edible oil imports - (Mln. tonnes)	4.3	5.9	8.3
Imports as share of demand	39.40%	38.10%	39.50%

Year	Minimum support Price Rs. per MT
FY2001	11,000
FY2002	12,000
FY2003	13,000
FY2004	16,000
FY2005	17,000
FY2006	17,250

• India occupies 3rd position in the list of rapeseed / mustard producing countries.
• India also ranks as the third largest producer of mustard/ rape oil in the world.
• The entire Mustard oil production is consumed domestically.
• The demand comes mainly from eastern and northern belts.
• Two basic types of mustard oil are traded in the market - viz. Kacchi Ghani and Pakki  Ghani (Expeller Grade Mustard Oil).
• Rapeseed/Mustard is traded in all major Indian commodity exchanges viz. National Commodity & Derivatives Exchange Ltd, Multi Commodity Exchange of India Ltd, Multi Commodity Exchange of India ltd and National Board of Trade, Indore

• Prices and demand-supply pattern of other edible oils in the country and abroad
• Monsoon in the country
• Pests, diseases and other environmental factors
• Speculation and Hoarding
• Consumption of by-products
• Production fluctuations

•  Almost 90% of the Mustard oil processing sector is unorganized in India with numerous small factories located throughout the mustard growing belt.
• With the removal of Excise and introduction of VAT etc, the organised sector now faces the advantage of taking over unorganised, loss-making units.

• National Dairy Development Board (Anand)
• ITC Agro-Tech (Secunderabad)
• Marico Industries (Mumbai)
• Ahmed Mills (Mumbai)

• Hindustan Lever (Mumbai)
• Wipro (Bangalore)
• Rasoi (Calcutta)
• Avi Industries (Mumbai)

• Oils: primarily a commodity market - price sensitive
•  Effective distribution chain - through a complex network of C&F agents, wholesalers / stockists & retailers (kirana shops, supermarkets).
• Oil sold in bulk (tin, HDPE containers) to institutions; in retail packs (PET bottles, cans, jars, pouches) to small customers.
• Seasonal demand for oils & vanaspathi - September to November (peak season).
• Regulation: Under the Edible Oils Packaging (Regulation) Order, 1998, edible oils cannot be sold loose’ but can be sold only in `packed’ form 
• Oil consumption - North is largest market, followed by South, West & East zones 
•  Imports and Prices
•  Oils and vanaspathi substitutes can be freely imported under OGL  
•  Import duties: 15 % basic + 10 % surcharge (Oil); 40% basic (Oilseeds) 
•  Large scale imports of oils and vanaspathi substitutes - primarily to check price rise and meet supply shortages

• Oil and vanaspathi used as cooking media (in households, hotels, restaurants, canteens, institutions)
• Vanaspathi used as an industrial input - for making bakery products & confectionery 

• Macroeconomic factors: Population growth, per capita income, purchasing power, oilseeds crop 
• Other factors: Prices - domestic/ international, Availability - oil, oilseeds
• Influence of branded products - `health’ message
• Growing preference for convenience foods. 

• Raw material sourcing:  focus on improving yields, getting better quality oilseeds, ensuring regular supplies - through symbiotic relationship with farmer
• Branding essential for success (Vanaspathi - Dalda, Oils - Sundrop) 
• Better distribution network to improve reach
• Efficiency in operation - to become price competent and withstand overseas competition
• Proposed Future trading in edible oils will help curtail price volatility and lend knowledge - based assistance to farmers of eliminate unofficial markets

• Free imports, low import duties and slump in global prices - lead to `dumping’
• Domestic industries of edible oils and vanaspathi affected - low realisation and idle capacities in oil and vanaspathi industries 
• Production slippages have also forced imports
• Excessive (cheap) imports of oilseeds - led to unremunerative prices, locally hence, farmers have shifted to other cash crops 
•  Increasing health awareness - impact of oils and vanaspathi usage on individual’s cholesterol levels

• In order to increase the domestic supply of oil seeds, the government has been frequently freezing the MSP for wheat and rice while increasing the MSP for oil seeds, thereby prompting a diversification from wheat-rice to oil seeds. This is intended to improve the supply of oil seeds. However, despite these measures, the demand-supply gap is likely to continue in the medium term. Again this does not push up prices, due to availability of low priced imports, as edible oil is the common man’s utility item.
• Free imports (since 1994) have further lowered the entry barrier to the industry as crude or refined oil can be imported, packed and distributed doing away with the need of having manufacturing facility in the domestic market.
• Customs tariff on edible oil continues to be the most important and dynamic area of government intervention. India adopted a modified tariff schedule for agricultural products in March 2000. The tariff bindings, subsequent to revision in 1996 and renegotiations within the WTO in 1999 retain the overall structure notified after the Uruguay Round: 100% for commodities, 150% for processed products, and 300% for edible oils. Departures from this pattern are mainly with respect of tariff lines that were negotiated as special cases. India's bound rates for edible oil are as high as 300% ad valorem, except for 45% on soybean oil, and 75% for rapeseed oil. On all other oils, the GoI can raise the level of customs duty up to 300%.
• The per capita consumption of oil in India is 11.5 kg/year is way below the world average. Even china is at 17 kg. By 2010 the per capita consumption of oil in India is likely to be 15.6 kg. There is huge potential of growth.