The speculative instinct of the country’s vegetable oil trade and industry is well known. Its risk appetite is whetted by a combination of chronic shortage, lack of timely and reliable data, and reactive and often delayed policy intervention.
Data drought: Speculators thrive on information arbitrage in the absence of timely data relating to production, processing, export, import, and distributive trade. Perhaps the only piece of information publicly available every day is the market price. Policymakers often decide market intervention measures based on price movement alone that often prove inadequate.
Liberalisation is not a licence: Ironically, in our country liberalisation is mistaken for a licence, not realising that liberalisation comes with an unstated duty to behave responsibly and with discipline. After years, the Centre seems to have woken up to this reality.
Transparency: In order to strengthen transparency and data-driven decision-making, the government has amended the Vegetable Oil Products Production and Availability (Regulation) Order, 2025.
This order mandates that all producers of crude/refined vegetable oils, solvent-extracted oils, blended oils, vanaspati, margarine, and other specified vegetable oil products, as well as packers, must register on the official VOPPA portal and submit monthly returns, covering production, imports, opening and closing stocks, dispatches, sales, and consumption by the 15th of every month.
New Delhi claims that the amended order represents a major step by the government towards a transparent and data-driven edible oil ecosystem, enabling enhanced monitoring of the supply chain, accurate data collection, and improved policy planning to support national food security objectives. By ensuring regular, authentic information flow from producers, the initiative will help the government design more responsive interventions in the edible oil sector, it is claimed.
So far, so good. But the new regulation is most unlikely to prove adequate to advance the stated objectives. Data intended to be collected would be historical. In any commodity market, it is axiomatic that today’s price represents not just today’s market fundamentals of supply and demand but also anticipated changes in the fundamentals in the near future.
While the monthly returns will provide historical data of production and stocks, policymakers actually need forward guidance for effective intervention. Currently, systematic forward guidance is absent.
In the dynamic global vegetable oil market, multiple drivers operate simultaneously and with varying intensity. Economic growth, geopolitics, monetary policy, currency gyrations, weather, and the flow of speculative funds are key drivers.
Massive imports: India imports approximately 15 million tonnes of various vegetable oils a year valued at a whopping $15-16 billion. Currently, the government has no clue about contracted quantities, types of oil, price and arrival period. This is a major weakness in the vegetable oil trade, as imports represent about 60 per cent of our total consumption.
This humongous volume of import deserves close monitoring. It can be done by mandating that importers must register their contracts with a designated agency or government portal. Registration of import contracts will generate adequate and reliable data in advance for policymakers to undertake proactive intervention measures.
It will surely advance transparency and data-driven decision-making. A well-monitored edible oil sector will help strengthen national food security as well as reduce information arbitrage and speculative tendencies.
While the Union Ministry of Consumer Affairs, Food and Public Distribution has notified VOPPA 2025, other ministries have to play their part. The Ministry of Agriculture must ensure oilseed production estimates are released without delay. The Ministry of Commerce must put in place a system of import contract registration and monitoring of arrivals.
Beyond data collection, there is a strong case for including edible oil under welfare programmes like the public distribution system and national food security mission along with rice and wheat. It will further enhance food security, especially among the vulnerable sections of the population.
Is New Delhi listening?
G Chandrashekhar is an economist, senior journalist and policy commentator, and provides policy inputs for the government. Views are personal.
