India Places Orders for Russian Sunflower Oil at Record Price to Replace Shortfall from Ukraine

India imports 60 percent of its total requirement of edible oils, including palm oil and sunflower oil. As supplies of sunflower oil have been disrupted from the most prominent producer, Ukraine, Indian dealers are mulling options to ease the shortage of edible oils in the country.

India has started replacing Ukrainian sunflower oil with Russia, as dealers have contracted at least 45,000 tonnes for April delivery.

India's edible oil players, such as Gemini Edibles & Fats India, have received letters of credit from Indian banks.

This is the first order since Moscow began its special military operation in Ukraine to "demilitarise" and "de-Nazify" the Eastern European country.

The delivery will ease the supply constraint in the domestic market, which has recently seen a sharp surge in edible oil prices.

"India usually imports about 175,000-200,000 tonnes of sunflower oil per month. In April, we expect 100,000 tonnes of sunflower oil to arrive", B.V. Mehta, executive director of the Solvent Extractors' Association of India, told Sputnik.

The executive director of the premier vegetable oil industry association said that the shortfall would be met by increasing imports from Russia.

"We expect more supply as two ports of Russia are still operating. Government is very keen to resolve the payment mechanism, and we hope it will be sorted out soon whether it would be in rupee or rupee-ruble mechanism; let's wait", Mehta added.

Russian Foreign Minister Sergei Lavrov is expected to arrive in New Delhi in the first week of April to discuss a range of bilateral issues, including finalising a payment system to continue trade.

In February, about 152,000 tonnes of sunflower oil arrived in India. A similar quantity is likely to come in March, as vessels that left before the military operation will arrive at Indian ports this month.

"Sunflower oil from Russia could help the world's biggest edible oil importer in easing the shortfall at a time when the availability of vegetable oils is stretched because of Indonesia's decision to restrict palm oil supplies and lower soybean crop in South America", Atul Chaturvedi, director of India's major edible oil player Adani Wilmar Ltd., said.

However, Mehta of the Solvent Extractors' Association of India said that the current landing cost of sunflower oil is around $2,100 per ton compared to approximately $1,600 per ton a month ago.

"At this landing cost, sunflower oil will be available for Indian consumers at INR 200-250 per litre. We do not think the demand will sustain at this high price", Mehta added.

India paid over $20 billion in import bills in 2021-22 for only 13 million tonnes of edible oil. It is worth noting that in 2019-20, India's imports of edible oils were close to 15 million tonnes, valued at less than $10 billion.