Top cooking oil buyer India slashes imports as war hits demand

India, the world’s largest buyer of vegetable oils, is slashing imports as the war in Iran drives up prices and sparks fuel shortages that are choking demand across the country’s vast food-service industry. The month-long conflict in the Middle East has upended global energy supply, causing a fuel crunch that’s being felt across Asian economies. In India, shortages of cooking gas LPG are rippling through kitchens, as eateries from Delhi to Mumbai and Bangalore scale back operations or shift to kerosene burners or wood-fired stoves.

With about 40% of the country’s vegetable oil soaked up by hotels, restaurants and caterers, the slowdown in these businesses has caused consumption to fall sharply, especially across urban and mid-sized towns, according to Aashish Acharya, vice president at Patanjali Foods Ltd., one of the country’s top importers. India’s vegetable oil demand is expected to drop by around 250,000 tons to 300,000 tons each month, and will shrink further if the war prolongs and LPG supply for commercial use remains restricted, he said. “This situation highlights the intricate connections between key geopolitical events and local markets, as well as changes in consumption patterns in India,” he said.

Domestic edible oil prices have climbed by as much as 17% over the past month, thanks to currency weakness, elevated freight rates and higher logistics and operating costs, he added. Vegetable oils are an integral part of Indian diets, and increasing affluence means annual per capital consumption has nearly tripled over the past two decades to about 24 kilograms. The country is the world’s biggest buyer of palm, soybean and sunflower oils, and imports more than two-thirds of its requirements.

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Import costs have now risen by about 25%, according to Mayur Toshniwal, president and head of trading at Emami Agrotech Ltd., an Indian vegetable oil importer and processor. “Demand will also reduce at these higher levels,” he said. Sustained demand destruction could prove a significant and lasting blow for producers, including palm exporters in Indonesia and Malaysia.

India’s vegetable oil imports were estimated to have eased to about 1.2 million tons in March from 1.32 million tons a month earlier, said B.V. Mehta, executive director of the Solvent Extractors’ Association of India, adding that consumption in urban areas would remain impacted for the time being due to the LPG shortage. Import data for March is due for release in mid-April.

The upheaval across food and fuel markets is also seeing more Indians shift to eating at home. Usage of soy, sunflower and rapeseed oils have picked up in households, although overall purchases remain subdued as high prices discourage stockpiling. “Demand has gone hand to mouth, as everyone wants to avoid building inventory at such prices,” said Toshniwal.

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