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Edible oils are already central to India’s kitchens, retail shelves, and personal care aisles. But with prices on the cusp of change, the aftershocks could be felt far beyond households. From food makers to restaurants, from FMCG majors to allied industries, the beneficiaries of this shift may be far more diverse than most expect. Could this price turn set the stage for the next big consumption story?
Suppose you have ever wondered what links the samosa at your street corner, the packet of chips in your cupboard, the soap in your bathroom, and even certain specialty chemicals in factories. In that case, the answer is surprisingly simple: edible oil. More specifically, palm oil and its cousins, soybean and sunflower oil. These oils do not just dominate our kitchens; they run through an astonishing array of industries. And in India, where more than half of the edible oil consumed is imported, even a small policy change or global price swing can ripple through entire value chains, shaping company profits and consumer prices alike.
At the end of May 2025, the government pulled an important lever that set such a ripple in motion. It halved import duty on crude edible oils—palm, soybean, and sunflower—from 20 per cent to 10 per cent, while keeping duties on refined oils much higher at 32.5 per cent. The move widened the gap between crude and refined oils, nudging companies to import crude and process it locally instead of relying on refined imports. In effect, it was a “Make in India” signal for edible oils, aimed at boosting domestic refining, controlling food inflation, and eventually easing cooking oil prices for consumers.
What the policy means
To understand why this matters, one needs to see how the oil market functions. Palm oil is the workhorse of India’s edible oil basket, making up almost half of all imports. It sets the tone for pricing because it is cheaper than soft oils like soybean and sunflower, and easily interchangeable in frying and processed foods. When palm oil becomes cheaper, demand swings towards it; when it rises, buyers substitute soft oils. By cutting crude duties, the government made it more attractive to import raw palm oil, refine it in Indian plants, and sell it domestically. Data in June confirmed this shift: palm oil imports for May jumped nearly 84 per cent month-on-month as traders restocked in anticipation of cheaper supply (source: Reuters).
Who benefits across industries?
For refiners, the economics are straightforward. Their money lies in the spread between what they pay for crude oil (including taxes and logistics) and the price at which they sell the refined product. By lowering duties on crude but not refined oil, the government widened that spread in refiners’ favour. This means plants in Gujarat, Andhra Pradesh, and elsewhere can now run at higher utilisation levels and enjoy healthier margins. It is no surprise that integrated players like Adani Wilmar, Patanjali Foods, and Gokul Agro Resources are expected to be the immediate winners.
But the effects go much further. Once refined oil prices start to ease, the next set of beneficiaries are food companies. Think of biscuits, breads, cakes, and chocolates where palm oil is an essential ingredient. Britannia and Mrs Bectors, for instance, have long struggled with inflation in vegetable oil, wheat, cocoa, and packaging. Palm oil alone can account for nearly a fifth of raw material costs in some bakery businesses. Lower edible oil prices, therefore, bring direct relief to their gross margins, which had been squeezed in recent years. That relief allows companies to either pass on savings to consumers—restoring grammage where “shrinkflation” had crept in—or retain some benefit in improved profitability.
The impact is sharper still for namkeen and snack makers. For companies like Bikaji, Prataap Snacks, and Gopal Snacks, frying oils make up nearly a quarter to a third of total raw material costs. When palm oil prices soared in the past, these firms saw margins collapse despite raising selling prices. With duties cut and cheaper crude imports flowing in, their input costs will fall quickly. Unlike bakery businesses, where contracts and recipes take time to reset, snack makers see a more immediate lift in margins when frying oil prices drop. For investors, this segment may see the cleanest and fastest rebound in earnings.
Personal care products form another, more subtle link. The soaps and detergents made by Hindustan Unilever and Godrej Consumer Products use palm derivatives as key ingredients. Lower palm oil costs help stabilise margins in their soap businesses, though the impact at the overall company level is smaller given their diversified portfolios. Over the past decade, HUL has even reduced palm oil’s share in formulations to limit sensitivity to swings. So, while cheaper palm oil will not transform their fortunes, it offers useful breathing room and pricing flexibility.
Moving further downstream, specialty chemical companies like Galaxy Surfactants and Aarti Surfactants rely on palm kernel oil to make fatty acids and fatty alcohols—essential feedstocks for detergents, shampoos, and cosmetics. When palm oil prices ease, their input costs decline, but so too do selling prices, which are benchmarked globally. They get temporary margin relief, though the advantage narrows as contracts reset. Similarly, Fairchem Organics, which buys fatty-acid distillates—by-products of edible oil refining—benefits when more crude oil is refined domestically because it increases feedstock availability.
There is, however, one segment that feels the pinch: plantations. Godrej Agrovet, India’s largest private-sector palm plantation company, earns directly from selling crude palm oil. When prices fall, its margins shrink unless volumes rise enough to offset the decline. In recent quarters, higher realisations had supported its plantation business, but with global crude prices under pressure and import duties cut, those gains could quickly reverse.
What it means for consumers and the market
One crucial nuance is timing. The government announced the duty cut at the end of May 2025. But by then, most refiners and FMCG companies had already stocked up on inventories purchased at higher prices. That meant the first quarter of FY26, covering April to June, was still weighed down by expensive stock. Indeed, the June quarter results of most refiners and FMCG companies did not yet show meaningful benefit from cheaper crude imports. CRISIL and ICRA have noted that while revenues in FY26 may actually decline slightly due to lower realisations, margins and utilisation should improve structurally. The true benefits are expected later in the year, once old inventory is cleared and new crude shipments, priced under the revised duty regime, filter through production lines.
For investors, this staggered timing is important. It explains why the share prices of edible oil refiners and food companies did not surge immediately after the duty cut, even though the economy improved. The lag between policy and financial impact is a reminder that commodity-linked businesses often move with a delay. See details.
Source: Online/GFMM
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