8/6/2019 Edible Oil Consumption

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Edible oil consumption in IndiaBy P. Ramesh and M. Murughan

The Indian edible oil market is the

world’s fourth-largest after the

USA, China and Brazil. A grow-

ing population, increasing rate

of consumption and increasing

per capita income are acceler-

ating the demand for edible oil

in India. This paper analyses the

trend in edible oil consumption

and the prospects for the Indi-

an edible oil market in the com-

ing years.

India is a leading player in edible oils, being

the world’s largest importer (ahead o the EUand China) and the world’s third-largest con-

sumer (ater China and the EU). Each year, In-

dia consumes over 10 million tonnes o edible

oils. Edible oils have a high penetration o 90%

in India. However, per capita consumption o

edible oils is around 11 kg per year. This is con-

siderably lower than in most developed coun-

tries. Palm oil (mainly imported) and soya bean

oil account or almost hal o total edible oil

consumption in India, ollowed by mustard and

groundnut oil. In India, most vegetable oil is

purchased by household or industrial buyers

(ood processors, restaurants and hotels) or

rying or baking needs and is sold as loose oil

or vanaspati (partially hydrogenated vegetable

oil). Only a small percentage o edible oils are

sold in branded orm at the retail level.

Types of oils commonly in use in India

In India consumer oil preerences vary rom re-

gion to region because preerence is based on

local cultivations.

portant amongst the plantation crops. Among

the non-conventional oils, rice bran oil and cot-

tonseed oil are the most important.

Demand for edible oils

Vegetable oil consumption in the country is con-

tinuously rising and has sharply increased in

the last couple o years to roughly 11.2 kg/

head/year. This is still lower than the world aver-

age consumption level o 17.8 kg and that in

neighbouring countries like Pakistan (16.1 kg).

The developed western world has a per capita

consumption o 44 to 48 kg/year. According to

projections rom the National Council o Ap-

plied Economic Research (NCAER), per capitaconsumption o edible oils is likely to reach

13.95, 14.83 and 16.17 kg by 2009-2010 i per

capita income grows by 4%, 5% and 6% re-

spectively.

Consumption factors:

 Per capita consumption o edible oil is low–

(11 kg) – but rising gradually;

Extreme variation in consumption. The–

country’s top 10% o the population

consumes 20 kg per capita and the

bottom 30%, less than 5 kg per capita;

Strong regional preerence or ‘rst press’–

oils with natural favour – mustard,

groundnut, coconut oils;

Inadequate quality control and quality–

assurance mechanisms lead to

adulteration;

Antiquated ood laws and poor implemen-–

tation;

Low depth liquidity in utures markets;–

Erosion o sel-reliance in edible oils and–

rising dependence on imports. Imports

currently constitute 45% o aggregateconsumption.

Demand drivers for edible oil consumption:

GDP growth and rising Income

India is the ourth-largest economy in the world

and the astest-growing signicant economy

with an average GDP o 6%. It has a population

o 1.06 billion, which is growing at a rate o 1.65%

per annum.

According to the NCAER, there are ve

classes o consumer households, ranging rom

the destitute to highly afuent, which dier con-

siderably in their consumption behaviour and

ownership patterns across various categories

o goods. These classes exist in urban as well

as rural households and consumption trends

may dier signicantly between similar income

house holds in urban and rural areas.

Movement to cheaper oils / Pricing power

Edible oil prices are a sensitive issue or Indianhouseholds. Edible oil being an essential ingre-

Region Preferred oil

North Mustard, rape

East Mustard, rape

West Groundnut

South Groundnut, coconut

India is ortunate in having a wide range o oil-

seed crops grown in its dierent agro-climatic

zones. Groundnut, mustard/rapeseed, sesame,

safower, linseed, Niger seed/castor are the ma-

 jor traditionally cultivated oilseeds. Soya bean

and sunfower oils have also assumed impor-tance in recent years. Coconut is the most im-

Structure of the Indian consumer market

Consumer classes (annual income in Rs) 1996 2001 2007

The rich (Rs 215,000 or more) 1.2 2.0 6.2

The consuming class (Rs 45,000 - Rs 215,000) 32.5 54.6 90.9

The climbers (Rs 22,000 - Rs 45,000) 54.1 71.6 74.1

The aspirants (Rs 16,000 - Rs 22,000) 44.0 28.1 15.3The destitute (less than Rs 16,000) 33.0 23.4 12.8

Total 164.8 179.7 199.3

Source: NCAER

India is the world’s largest importer and the third-

largest consumer of edible oils.

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