The Global Hunger Index 2019 ranks India at 102 out of 117 countries, and with a population of 1.37 billion people, all policy making in India is pivoted on food security, and palm oil (in the form of edible vegetable oil) lies at the crux of this equation.

Associated with global deforestation and peatland destruction, the most commonly used and low priced edible oil is imported from the producing geographies of Indonesia and Malaysia. Due to its versatility in the kitchen and comparatively cheap prices, palm oil form the bulk of India’s vegetable oils sector and indeed the edible oils market as well, with the relatively inelastic demand (wherein the demand is not determined by the prices) of palm oil in the short run.

Palm oil consumption has drastically increased by almost 230% over the last two decades. This links directly to India’s growing population and the associated increase in the demand for loose and unbranded oil – primarily consumed by low socioeconomic status (SES) households and industrial consumers such as snacks and halwais (sweets shops). The increased demand is also associated with the growth of the blended oils segment where palm oil remains a key component of multiple vegetable oils sold in the Indian market.

India’s Edible Oil Market

India is the largest net importer of palm oil and consumes 13.5% of the global production of palm oil.

In India, domestic consumption significantly exceeds domestic production, which comes to about 260,000 MT annually, while the gap continues to be plugged by imports upwards of 10 MMT.

According to RSPO’s estimates, approximately 98% of palm oil (crude, refined and processed) consumed in India is imported from other countries of which less than 1% is certified sustainable (CSPO). This puts India at both a significantly higher deforestation footprint and a great strategic position to take on a stewardship role in regional trade to drive the demand for responsibly/sustainably sourced palm oil.

Edible Oil Consumption in India


Per FAO estimates in The State of Food Security and Nutrition in the World report, 194.4 million people are undernourished in India, highlighting further the need for the nation to prioritize food security. This results in prioritizing low-price options for meal preparations for 1.37 billion people, many of who continue to live below the poverty line. Palm oil emerges as a front-runner  in the edible oil category due to its low prices and availability along with its versatility in blended segments with mustard, coconut, groundnut and sesame – locally produced and traditionally used vegetable oils for all Indian cooking.  The most dominant cooking medium in India called Vanaspati, (hydrogenated vegetable oil) is made primarily from palm oil.  It is also extensively used by the food industry — for everything from traditional Indian sweets and savories to confectionery, breads, biscuits and noodles — as well as in the fast growing quick-service restaurants.

The Indian Consumer

Demand continues to drive supply with the average Indian consumer being largely unaware of  the impact of their purchases. Most Indians shop for their daily groceries in street markets and small family-owned stores.

These purchases are driven primarily by a “minimum price-maximum value” mindset, aimed at getting more quantity in given prices and most often have little to do with brand association.

Because of this way of interaction with the oil, the largest segment of this particularly price sensitive consumer group remains brand-agnostic and certification-agnostic, and thus is ignorant of the need for responsible sourcing.

On average, prices in India are 10-30% lower as compared to other markets, adjusting for purchasing power parity. For example, the bottle of the same vegetable oil is differently priced in India and in other geographies. This is reflected at various stages of the palm oil value chain – from production to retail. At various stages, any additional cost centres (i.e. the cost of certification) need to be removed by FMCG companies in order for a product to remain relevant to the Indian market.

While there has been some media coverage mentioning the impact of India’s palm oil imports on global deforestation and offshore biodiversity loss there has not been much progress in terms of consumer awareness. In this, NGOs such as WWF, Greenpeace and others have tried to also work on building consumer awareness in order to push for greater uptake of sustainability standards. However, the end-consumer typically does not look beyond price, much less at the adverse effects of the value chain of the product in their hand – and the demand for unsustainable palm oil continues to grow.

Certified Palm Oil in India

It is estimated that the difference in prices between sustainable (CSPO) and conventional palm oil would come to over $30–$50 per ton owing to the cost of certification. Indian companies argue that with no policy push and the negligible demand (for higher-priced “sustainable” products owing to no perceivable difference or health impact of product), it is difficult to afford this cost of certification. 

It is clear that for the Government of India sustainable sourcing is not as immediate a priority as the increase in domestic production which is aimed at import substitution with a view to increase food security. This has been further amplified now by the strong emphasis laid on local supply chains in the aftermath of the COVID-19 crisis.


The Challenge of Making Sustainable Palm Oil the Norm

Compounded by the lack of consumer action, highly elastic demand and the absence of on-product sustainability labelling, sustainable palm oil is faced with a chicken-and-egg problem of who moves first – policy actors, consumers or brands and indeed how.

The FAO Vegetable Oil Price Index has declined 12.0 percent in one month, mainly stemming from falling palm oil prices and rising uncertainties over the pandemic’s impacts on global markets. India’s edible oil market went down by 32.44% even as it suspended import licenses for refined palm oil on alleged rule of origin violations in early May 2020.

There is now, an urgent need for private sustainability governance with progressive multinationals with global commitments leading with example. Companies with strong sustainability practices are being seen as more resilient in the current global crisis. Large companies with global value chains (Unilever, Cargill, PepsiCo and a few others), were already looking to match their India operations with global public commitments on responsible sourcing.

IDH Palm Oil Program in India

The factors that have made palm oil a success have also brought with it well-documented environmental and social challenges. Most prominent among these are links to deforestation, labour rights, and damaging effects on nature and the environment, particularly when grown unsustainably.

Our Palm Oil program supports the production of traceable and sustainable palm oil at scale. We do this through partnerships with local and international companies and governments in Indonesia and Malaysia, and by working on the demand side in markets like EU, India and China.

Through our palm oil market program, we aim to mainstream the  uptake of sustainable palm oil. Larger uptake will create benefits of scale, reducing sourcing costs. And increased demand will create economic incentives for palm oil producers to delink deforestation from their production and implementing good agricultural practices.

With three pillars of engagement: convening market and sustainability actors, policy engagement for import regulation and increased uptake of responsibly sourced palm oil, IDH India works with various actors in the Indian value chain towards bringing sustainability from niche to norm.