Russia-Ukraine war may lead to crude sunflower oil scarcity in India

New Delhi, March 31: Disruptions caused by the ongoing Russia-Ukraine war are likely to trigger a supply shortage of at least 4-6 lakh tonnes of crude sunflower oil for India during the financial year beginning April 1, according to CRISIL Ratings estimate released on Thursday. "This, in turn, will have a bearing on the production planning of domestic edible oil processors," CRISIL stated in a report. "A protracted trade disruption will push edible oil processors to source more crude sunflower oil from Argentina. This, however, will not be enough to offset the material shortfall in volume from Ukraine and Russia. To reduce the resultant idle capacity, the processors may choose to refine other edible oils," says CRISIL Ratings Director, Nitin Kansal. Refined sunflower oil accounts for around 10 percent of India's consumption of 230-240 lakh tonnes of edible oils (all types) per year. India imports nearly 60 percent of its edible oil requirement, which makes it extremely vulnerable to adverse developments in global trade, oilseed production and regulatory changes in major import centres. Worse, Ukraine (70%) and Russia (20%) supply up to 90% of India's annual crude sunflower oil requirement of 22-23 lakh tonnes, with the rest coming from Argentina and other countries. Ukraine and Russia together export approximately 100 lakh tonnes of crude sunflower oil each year, with Argentina coming in third with 7 lakh tonnes. After sanctions imposed by the United States and European nations, Russia's biggest banks have been cut off from the SWIFT system. Even though food trade with Russia is not prohibited, trade settlement has become complex, causing supply disruptions. Also Read | Kejriwal slams BJP for vandalism, says 'Country's largest party indulging in hooliganism' Domestic edible oil processors generally maintain raw material inventory of 30-45 days, which should help them tide over the supply shock in the immediate term. However, supply and prices will start suffering if the war and the attendant trade disruption continue. The supply disruption in crude sunflower oil follows a 25 per cent increase in the average price of refined edible oils this fiscal. Due to supply-side factors, crude edible oil prices are up this fiscal year. For example, crude soybean oil has risen due to a poor harvest in Brazil, while crude palm oil has surged due to low output in the world's major producers, Indonesia and Malaysia. More than 75 percent of India's edible oil imports are soybean oil and crude palm oil. Also Read | Sonia Gandhi voices concern over MGNREGA budget allocation, payment of wages -PTC News