Russia-Ukraine Crisis: Edible oil prices to surge again

If your household budget is already stretched beyond what you can afford and you are expecting some respite anytime soon, the invasion of Ukraine has surely brought bad news for you. 

After a year of repeated price hikes on edible oil by the country's leading brands, the latest developments have put them on the tricky ground again. With the severe threat of supply disruptions, companies are left with not many options but to consider hiking prices of daily-consumed edible oils within weeks. 

As Russia versus Ukraine war gets murkier, the supply of crude edible oil is set to get hampered in India. According to leading edible oil makers in the country, over 70 per cent of India's crude edible oil demand is met through imports. 

For Sunflower oil, the share is even higher. While the Russia-Ukraine region is a major player in this segment, the ongoing war is expected to lead to price escalation and shortage of supply of crude edible oil, if the leaders of the two countries do not shake hands in the next 7-10 days.   

Angshu Mallick, Chief Executive Officer and Managing Director of the country's largest edible oil company Adani Wilmar told Business Today that they are closely monitoring the situation. 

"Russia and Ukraine together account for 90 per cent of Sunflower oil requirement. Our country's dependence on Sunflower oil is around 15 per cent of all the oils. Things will be as usual if the situation normalises within 7-10 days as the oil importers have an inventory of up to 45 days. But if the crisis continues for 5-10 days more with oil factories remaining closed and no vessel available, then there is some scarcity we may feel in April", said Mallick. 

AWL is not only the largest importer of edible oil in the country but is also the market leader with nearly 19 per cent share in its kitty. In the packaged sunflower oil market, it holds a 14 per cent share and is among the top three players. 

Marico Ltd. that markets the popular Saffola brand of edible oils, is already gearing up to effect cost optimisation measures to keep price hikes in control. 

According to Saugata Gupta, MD and CEO of the company, the evolving geopolitical scenario "can flare up the prices of crude oil and other commodities further which will have a cascading impact on raw materials and packing materials. 

"Organisations will have to gear up and take measures to absorb some of the cost through aggressive optimization initiatives and perhaps pass on some of the pressure to consumers in a calibrated manner," he told Business Today. 

According to Mallick, the shortage and cost escalation in the sunflower segment may lead a segment of consumers to shift towards soybean and palm oils. 

"As far as pricing is concerned it depends completely on supply. Prices will come down if things normalise within a 7-10 days period. At Adani Wilmar, we have deep insights into the global scenario as we are the largest importer of Sunflower oil. Also, our partner Wilmar has factories in Ukraine and Russia so we have managed our stocks better," he added. 

Even before the war between Russia and Ukraine began, in the last one year, the edible oil market in India has been on fire. 

Repeated price hikes in the international markets for crude edible oils, steep rise in ocean freight costs and cost of logistics domestically resulted in prices of edible oils to surge by 50-80 per cent. In the December quarter alone, edible oil prices surged by 30 per cent on average. 

Also read: India abstains on UNSC resolution that 'deplores' Russia's aggression against Ukraine

Also read: Russia-Ukraine War: Refrigerators, ACs, electronics to get costlier soon