Sunflower Oil Supply Drop: India Faces 10% Volume Decline

Mumbai, April 2 India's sales volume of refined sunflower oil is expected to decline by about 10 per cent in the current fiscal due to supply-chain disruptions caused by the Middle East conflict and rising prices, which are likely to drive consumers towards cheaper alternatives, a report said on Thursday.

The sales volume of Indian refined sunflower oil is poised to decline by 10 per cent in the current fiscal, due to twin headwinds that will dampen demand, Crisil Ratings said in a report.

Firstly, supply-chain disruptions caused by the Middle East conflict, and secondly, higher prices resulting from the pass-through of increasing logistics costs, will likely lead consumers to switch to cheaper substitutes such as rice bran and soybean oils, it said.

However, revenues are expected to remain flat during the year, as higher realizations will offset the volume drop, it added.

Crisil Ratings said that the profitability of sunflower oil refiners will also remain stable, with inventory gains from previously acquired low-cost inventory largely offsetting the negative operating leverage from the volume dip.

Increasing crude prices and supply-side bottlenecks will tighten the inventory levels of domestic sunflower oil refiners in the short term, said the report.

However, this will also lead to a temporary release of working capital that will aid cash flows.

Moreover, strong balance sheets will help keep credit profiles stable for domestic sunflower oil refiners.

According to the report, refined sunflower oil accounts for 12-14 per cent of India's annual edible oil consumption of 25-26 million tonnes.

The industry depends heavily on imports of crude sunflower oil, making it vulnerable to global trade disruptions and geopolitical developments.

A large portion of the imports is from Ukraine and Russia, and with the ongoing conflict in West Asia, vessels are taking longer routes, such as around the Cape of Good Hope, increasing voyage distance and transit time.

Moreover, for vessels passing through conflict-sensitive regions, war-risk insurance premiums have risen, which has increased the landed cost of crude sunflower oil for Indian refiners.

"Since the West Asia conflict began, the average import price of sunflower crude oil has risen to USD 1,420-1440 per tonne currently, compared with USD 1,275 per tonne on average for the trailing 12 months. A weakening Indian rupee and higher shipping costs are further increasing the landed cost of crude sunflower oil in India," Crisil Ratings Director Jayashree Nandakumar said.

An increase in sunflower crude cost would eventually translate into higher retail prices of refined sunflower oil, which is currently trading at Rs 170-175 per litre against Rs 150 per litre in January 2026.

Moreover, as rice bran and soybean oils are currently trading at a discount of Rs 10-20 per litre to sunflower oil, there could be a partial shift towards these substitutes.

Moreover, amidst the price increase, inventory levels with domestic sunflower oil refiners have been gradually declining since the onset of the war.

"Refiners typically maintain raw material inventory of 30-45 days to manage supply disruptions and price volatility. However, inventory has dropped to 20-30 days amid the West Asia conflict-induced increase in prices. While it reflects supply uncertainty and slower replenishment cycles, the lower inventory position has had a marginally positive impact on near-term liquidity due to release of working capital for refiners," Crisil Ratings Associate Director Rishi Hari said.

However, a prolonged disruption could tighten supplies further and exert pressure on prices and procurement strategies, added the report.