For many years, Anand Kumar Baghel, a 54-year-old farmer from Hatod Tehsil in Indore,has been growing maize and pulses on his 1.5 acres of land. However, the potential for higher profits enticed him to switch to soybean farming last year. Now he wishes he hadn’t made that choice. He sold his 10 quintals of soybean harvest in two quality-based batches at Indore’s Lakshmi Bai Nagar APMC (mandi) in the open market to traders, earning Rs 2,500 per quintal for one batch and Rs 1,900 for the other—much lower than the minimum support price (MSP) of 4,892 per quintal.
Soybean farmers in Madhya Pradesh are facing challenges due to erratic monsoon patterns, which have significantly impacted the region’s soybean cultivation, a major source of income for many farmers. Madhya Pradesh and Maharashtra are the two largest soybean-producing states in the country, contributing 54% and 30%, respectively, to India’s total production.
Adding to the woes, “rising input costs have severely impacted our profitability,” says Baghel. “With seed, fertiliser, and labour prices doubling, farmers are struggling, as their returns have remained stagnant—unchanged for over a decade,” he says.
“If farmers don’t get fair prices for their produce, they will be discouraged from sowing the same crop in the future. This season, soybean prices fell Rs 500-1,000 short of the MSP, highlighting the challenges farmers face, says Anil Ghanwat, President, Shetkari Sanghatana, a Maharashtra-based farmers’ union. He claims that farmers sell their produce in the open market throughout the year, often at unfavourable prices.
This isn’t a challenge exclusive to soybeans; it exists in other edible oil crops, such as groundnut and mustard, too. To help local farmers secure better prices for their kharif oilseeds, the government hiked the duty on vegetable oil imports in September 2024; the basic customs duty on crude palm, soybean and sunflower oils was raised from 5.5% to 27.5%, while the duty on refined grades was set at 35.75%, thereby making imports more expensive.
However, the increase in import duty did not yield the desired outcome. The prices stayed not only below the MSP but also lower than the levels seen during the period of duty-free imports, suggesting that the duty hike has not reversed the downward price trend. For example, soybean prices dropped from Rs 4,184 per quintal in October 2024 to Rs 3,962-4,080 in the first week of April 2025 in Madhya Pradesh and from Rs 4,145 to Rs 3,944 during the same period in Maharashtra, against an MSP of Rs 4, ..
“For soybean, the mandi prices in Madhya Pradesh mostly operated 15-17% below MSP during the harvest time (November-December 2024) despite the government procurement. The all-India average groundnut price stood also much below MSP during harvest,” says S.P. Kamrah, Secretary General of the Indian Vegetable Oil Producers’ Association (IVPA).
Industry stakeholders and experts attribute this to various factors, including global market influences, crushing margin challenges and trade loopholes. They believe that a more pragmatic approach is required to address these issues.
Crushed at the root
India’s per capita consumption of edible oil has increased sharply over the past decades, reaching 19.7 kg per year, according to a report by NITI Aayog last August. The increase in demand has significantly surpassed domestic production, resulting in a heavy dependence on imports to meet both domestic and industrial requirements.
In FY24, India produced a total of 39.7 million tonnes (MT) of oilseeds, compared to 41.4 MT in FY23, 38 MT in FY22, 35.9 MT in FY21 and 33.2 MT in FY20, according to the data by the Directorate of Oilseeds Development.
India is a major importer of edible oils, relying on imports to meet around 60% of its total needs. Palm oil accounts for a significant portion of these imports, nearly 60%, followed by soft oils like soybean and sunfl
“India’s edible oil consumption is 26 million tonnes per year, while domestic production meets only 16 million tonnes. Increasing import duty on vegetable oil could help in supporting local farmers,” says Pasha Patel, Chairman, Maharashtra State Agricultural Price Commission. “While the government increased the import duty by 20% in September, we had requested a 35% increase. An increased duty might have pushed oilseed prices above the MSP,” Patel adds.
Despite India’s heavy reliance on imports, farmers like Baghel are struggling to get fair prices for their produce. Some are even having difficulty finding buyers, forcing them to hold onto it for more days. This delay could potentially impact the quality of oilseeds, making it even more challenging for them to sell.
Experts could not provide the total volume figure or percentage range of edible oil crops currently held by farmers, processors and traders; however, they believe it is subst ..
Oil, toil and trouble
For the uninitiated, oilseeds consist of two main components: oil and meal. The ratio of oil to meal differs by type; for instance, soybeans contain 18% oil and 82% meal, while mustard and sunflower have 40% oil and 60% meal. After harvest, farmers sell oilseeds to traders and processors. Millers or processors crush the oilseeds and subsequently sell the oil and meal separately. Margins vary based on the crop and its quality. For instance, soybean meal (SBM) gener ..
However, the domestic demand for soybean meal has decreased over the past two years, primarily due to the heavy availability of rice and maize Distiller’s Dried Grains with Solubles (DDGS), a by-product of ethanol production. According to experts, the poultry sector, the major buyer of SBM, is shifting towards DDGS, a cheaper alternative to SBM. This has reduced demand for soybean meals, which led to reduced crushing, resulting in decreased buying and subsequently lower soybean prices. Rahul Cha ..
“The situation is further exacerbated by the overall high availability of SBM in global markets at lower prices versus Indian SBM, leading to lower exports of Indian SBM, Kamrah explains.
Higher import duties may not benefit domestic oilseed farmers if crushing economics aren’t favourable, according to experts. They say idle mills resulting from unprofitable meal exports will restrict farmgate demand, thereby making crushing economics more crucial than import volumes.
The negative crushing margins are attributed to weak global meal prices, which are a result of South America’s oversupply and capped oil premiums due to competitive imports.
Kamrah states that weak global meal prices have pushed margins into negative territory. So, even after the government hiked import duties, many crushers have reduced processing volumes due to losses, leading to limited demand for domestic oilseeds, leaving farmers like Baghel in the lurch. The profitability of the mills hinges on the difference between revenues generated from edible oil and oil meal sales and the input costs.
Additionally, excessive imports of palm oil, often blended with other oils, put local farmers at a disadvantage due to unfair competition, resulting in low prices for their produce, says Shetkari Sanghatana’s Ghanwat. Blending palm oil with other oils, typically in the 30% to 40% range, is a common practice to achieve desired food properties. This blending ratio is often used to balance the characteristics of the final product. He suggests that regulating imports and enforcing stringent blending ..
Trade loopholes
While the profitability of mills and global demand dynamics are important aspects of this discussion, it is essential to consider trade loopholes. According to agriculture economist Deepak Pareek, imported edible oils are being rerouted through countries like Nepal, using bilateral trade agreements to bypass duties. He says, “This duty avoidance dilutes the effectiveness of the tariff increase.”
Kamrah notes that the Indian duty hike has triggered zero import duties under the South Asian Free Trade Area (SAFTA). Trade expects about 1 million tonnes of zero-duty imports from SAFTA countries, especially from Nepal. “While this is bad for the domestic industry, it also dampened domestic sentiment, and hence, oilseed prices also came under pressure,” adds Kamrah.
All this emphasises the pressing need to tackle production and supply chain issues. On February 10, 2025, the Solvent Extractors’ Association of India (SEA) wrote to Prime Minister Narendra Modi highlighting concerns over duty-free imports under SAFTA, which they said were causing a “massive influx” of refined soybean and palm oils from Nepal and other South Asian countries. Under SAFTA, Nepalese refiners have been exploiting a duty advantage by importing crude oil and exporting refined oil to I ..
Between October 15, 2024, and January 15, 2025, Nepal imported 194,974 tonnes of edible oil, mainly crude soybean and sunflower oil, and exported 107,425 tonnes to India, according to the trade data. Nepal’s import volume exceeded its monthly requirement of 35,000 tonnes, indicating significant refining and re-export activity. Notably, Nepal’s exports of soybean oil to India have surged, despite the country producing little soybean oil itself.
Global tariff war: Pain ahead
The reciprocal tariffs imposed by US President Donald Trump, which are set to expire on July 9, have resulted in increased volatility in vegetable oil prices. According to trade data, the tariff announcements have led to a 7-8% drop in crude oil benchmarks, impacting related vegetable oil contracts.
Additionally, China’s recent announcement of a further 10% tariff on US soybeans has significantly reduced US exports. Experts say that this move has led to a decline in global edible oil prices, with US soybean oil futures dropping over 2% and palm oil and sunflower oil prices falling 3-4% in early April 2025. They anticipate a period of softer global edible oil prices, which could limit price gains for oilseed farmers in India.
“These tariffs create a shift in trade flows, with countries looking for alternative suppliers, which may impact the availability and pricing of these oils globally. As a result, India could face higher prices for palm, sunflower, and soybean oils, which are key imports. In response, India should focus on enhancing domestic production through targeted policies, such as those included in the National Mission on Edible Oils-Oilseeds,” says Nilachal Mishra, Partner and Head of Government & Publ ..
The Path Forward
The current oilseed situation in India poses a multifaceted challenge. “Firstly, there is no quick fix. Reducing import dependency requires a calibrated, multi-year strategy that balances farmer incentives, consumer affordability and market stability,” says Kamrah.
He suggests adopting a dynamic duty slab system wherein duties on crude and refined edible oils would automatically adjust within pre-defined bands tied to global price benchmarks. Secondly, he requests maintaining a duty gap of 15-20% compared to the current 7.5% to incentivise domestic refining and value addition. Kamrah also urges the implementation of rules that allow duties to adjust monthly based on a rolling average of global prices. This approach, he says, will minimise policy lag, ensur ..
According to experts and stakeholders, India should also prioritise strengthening its oilseed value chains, boosting productivity, and making the MSP system more functional and profitable for farmers. They highlight the high-cost structure of domestic oilseeds, which makes them uncompetitive with imports, especially during global price fluctuations. Additionally, supply chain issues like low productivity and inadequate processing infrastructure prevent domestic oilseeds from fully benefiting fro ..
For the duty hike to result in sustained price increases in domestic prices that benefit farmers, concurrent support is necessary to improve yields, processing efficiencies, and overall value chain integration. “Such structural improvements, along with tariffs, can significantly boost domestic prices in the short term,” says Mishra.
According to Pareek, India should provide farmers with high-yielding, disease-resistant seed varieties to boost productivity. Currently, India ranks fourth globally in soybean acreage but fifth in productivity. He also emphasises the need to strengthen government procurement at the MSP level by ensuring timely purchases and payments. While some states procure soybeans through price stabilisation schemes, improvements are needed in coverage, timing, and execution. “Increase buffer stocks or subsidary
Source Name : Economic Times