The World's Fuel Choices May Reshape India's Kitchen

India has spent years insulating itself from crude oil shocks by building petroleum reserves and widening its supplier base. The strategy is well founded, and more needs to be done, as the world's most populous nation imports almost 90% of its crude oil needs and spends billions of dollars each year. However, cooking oil has never inspired the same urgency, despite the country importing around 60% of what it consumes.

That looked like a manageable risk when exporters always had enough to sell. It looks rather different now.

Imports have more than tripled since 2006-07 to around 16 million tonnes in the year to October 2025, costing India almost $18 billion. At the same time, the world's biggest vegetable oil producers are keeping more of their output at home to meet biofuel demand, steadily shrinking the surplus available to buyers such as India.

Indonesia has given the clearest signal of where the market is heading. It has raised the palm oil content in biodiesel to 50% from 40%, a change expected to absorb another 3 to 3.5 million tonnes of palm oil every year. The US is moving in the same direction by lifting demand for soybean oil through a higher biomass based diesel mandate, while Malaysia is increasing its biodiesel blend to 15%. Taken together, these policies mean more vegetable oil is being consumed where it is produced, leaving a smaller exportable surplus for countries such as India.

None of these countries is targeting India. They are pursuing legitimate domestic energy goals. Even so, every extra tonne diverted into fuel is one less tonne available for export. For the world's largest edible oil importer, that matters.

Policy Balance
India, too, is pursuing its own energy security goals. Achieving a 20% ethanol blend five years ahead of schedule is a genuine policy success. Since 2014-15, the programme has displaced more than 31 million tonnes of crude oil imports and saved around $22 billion in foreign exchange.

But farm economics rarely work in neat compartments. Farmers respond to prices and incentives, not policy silos. If grains and sugar become more rewarding because of ethanol demand, oilseeds inevitably struggle to compete.

That trade-off becomes even sharper in a weak monsoon year. Rainfall has recovered after a slow start but remains about 17% below normal. Soybean sowing has dropped by around 65% from a year ago, while the area under oilseeds overall is down by more than 50%. Until now, India could usually offset a poor harvest by importing more. Whether that remains as easy in a tightening global market is the bigger question.

Domestic agricultural policies also deserve closer scrutiny. Farmers continue to favour cereals because government procurement at assured prices offers greater certainty than oilseed cultivation. At the same time, growing demand for biofuel feedstocks such as maize, sugarcane and rice further strengthens the economics of those crops. Oilseed production, despite repeated policy initiatives, continues to lag behind national requirements.

This does not mean India's biofuel programme should slow down. On the contrary, reducing crude oil imports remains an important strategic objective. The problem is that policies aimed at energy security and those aimed at edible oil self-reliance have evolved largely in parallel, without sufficient coordination. One should not end up undermining the other.

The answer lies in better aligning the two policies, rather than changing direction. Incentives for ethanol feedstocks should be balanced with stronger measures to encourage oilseed cultivation. Existing schemes need to deliver better results, while difficult policy questions, including the future of genetically modified mustard, cannot remain unresolved indefinitely if India is serious about reducing import dependence.

There is no immediate threat of Indian kitchens running out of cooking oil, nor is there any reason to expect prices to surge overnight. The real issue is that the assumptions underpinning India's edible oil strategy are beginning to change. As more vegetable oil is diverted into fuel, less is available for export. India recognised long ago that crude oil was too important to leave entirely to global markets. Cooking oil deserves the same strategic attention, before the next disruption exposes just how dependent India has become.