India's sunflower oil demand to drop 10% due to rising prices: Crisil

India's refined sunflower oil demand is set to drop by ~10% this fiscal due to supply disruptions and rising prices from the West Asia conflict. A Crisil report notes this will push consumers towards cheaper alternatives like soybean and rice bran oil.

Demand for refined sunflower oil in India is expected to decline by around 10 per cent in the current fiscal due to supply chain disruptions and rising prices, according to a report by Crisil Ratings. The report said the decline in volumes will be driven by twin headwinds, disruptions in supply chains due to the ongoing West Asia conflict and higher prices resulting from increased logistics costs. These factors are likely to push consumers towards cheaper alternatives such as rice bran and soybean oils. It stated, "Indian refined sunflower oil volume is poised to decline ~10% in the current fiscal, due to twin headwinds that will dampen demand."

Revenue Impact and Import Reliance

Despite the expected drop in volumes, revenues of sunflower oil refiners are projected to remain flat during the year, as higher realisations are likely to offset the decline in demand. India's sunflower oil industry is heavily dependent on imports of crude sunflower oil, making it vulnerable to global disruptions. A significant portion of imports comes from Ukraine and Russia.

Geopolitical Tensions Drive Price Hikes and Consumer Shift

The ongoing geopolitical tensions have led to longer shipping routes, with vessels now taking detours such as around the Cape of Good Hope, increasing transit time and costs. Additionally, vessels passing through sensitive regions are facing higher war-risk insurance premiums, further pushing up the landed cost of crude sunflower oil for Indian refiners.

As a result, retail prices of refined sunflower oil have increased to around Rs 170-175 per litre, compared to around Rs 150 per litre in January 2026. In contrast, rice bran and soybean oils are currently cheaper by Rs 10-20 per litre, which is expected to lead to a partial shift in consumer demand towards these substitutes.

Refined sunflower oil accounts for around 12-14 per cent of India's total edible oil consumption of 25-26 million tonnes annually.

Financial Outlook for Refiners

On the profitability front, the report said margins are expected to remain stable despite the volume decline. Refiners are able to pass on price increases to consumers, albeit with a lag of 10-15 days, and have strong hedging mechanisms in place to manage price risks.

The report also noted that inventory levels with domestic refiners have been gradually declining since the onset of the conflict, which could tighten supplies in the short term. However, this may also lead to a temporary release of working capital, supporting cash flows.

An analysis of nine sunflower oil refiners rated by Crisil, accounting for around 70 per cent of the industry revenue of Rs 36,000 crore, indicates that strong balance sheets will help maintain stable credit profiles despite current challenges. (ANI)

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