Edible oil prices may stay high even after onion rates cool

Onion prices are set to peak in the next few weeks and then fall as the Kharif harvest lifts supply.

Household budgets are under pressure again. Onions, cooking oil, sugar, rice and several pulses have turned sharply costlier over the past year. Potatoes and tomatoes, however, remain cheap. Edible oil prices are the bigger worry for families, because they may stay high long after onions cool down.

“The recent rise in food prices is not a broad-based demand-led food inflation story. It is primarily a combination of supply shocks, weather disruption and geopolitical conflict-led price spike in a few important commodities,” said Pushan Sharma, director-research, Crisil Intelligence.

Onion prices likely to cool as fresh crop arrives

Onions are the biggest pressure point right now. The all-India average retail price climbed to ₹54.13 a kg on September 24. That is almost double the ₹27.21 recorded a year ago, according to Department of Consumer Affairs data. Wholesale rates more than doubled to ₹4,617 a quintal from ₹2,107. Retail prices also jumped 24% in just one month.

The spike mainly comes from tight supply, and it should ease once the next crop reaches markets. Sharma said onion was seeing a short-lived surge. He expects it to peak over the next few weeks and then fall as the Kharif harvest boosts supply around October.

Madhavi Arora, chief economist at Emkay Global Financial Services, said part of the vegetable price rise was seasonal and linked to the weather.

“Vegetable inflation can be extremely volatile and tends to correct once supply conditions normalise,” she said.

The Centre is selling buffer onion stock at ₹35/kg through NCCF, NAFED, Kendriya Bhandar and mobile vans. It has also widened supplies by rail and road to major consumption centres. The Kanda Express is one such service.

Why edible oil prices are a bigger worry

Unlike vegetables, edible oil could keep household costs elevated for longer. Consumer affairs ministry data shows retail sunflower oil is up 19.5% from last year at ₹193.97/kg. Palm oil rose 15.9% to ₹153.61, and soybean oil gained 13.9% to ₹167.11. Peanut oil is up 11.4%, while mustard oil is up 8%.

“Among the crops showing a price spike, edible oil could be more persistent than others given the continuation of the West Asia conflict, as well as key suppliers such as Indonesia diverting an increasing share of their palm oil production towards biodiesel over the years,” Sharma said.

Arora said pulses and edible oil deserve closer attention. India depends on imports for both. So global prices, import costs and currency swings directly hit domestic rates.

On September 24, the Centre scrapped the 10% basic customs duty on crude sunflower oil. It cut the duty on crude soybean and palm oil to 5%. It also lowered the matching duty on refined oil. The 19.25 percentage point gap between crude and refined oils remains.

Pulses and rice cost more too

Tur and urad dal prices are each up nearly 8% over the past year. Tur now sells at ₹125.18/kg against ₹116.12 a year ago. Urad costs ₹122.89 against ₹113.95. Chana, moong and masur saw much smaller increases, government data showed.

Rice is 7.6% costlier than last year at ₹46.43/kg. Wholesale prices climbed nearly 8%.

Sharma said rice output could dip this Kharif season. He pointed to weather risks, lower acreage and weaker yields. Still, large government stocks offer a solid cushion.

The government has kept tur and urad imports in the “free” category until March 31, 2027. It is also buying pulses under its price support programme to strengthen domestic supply.

Sugar gets pricier, but the Centre steps in

Sugar posted one of the sharpest yearly jumps in the kitchen basket. The retail price stands at ₹56.70/kg, up 22% from ₹46.46 a year ago.

The Centre cut the stock limit for sugar dealers from 4,000 quintals to 2,000 quintals until November 30. The move aims to curb hoarding and speculative trading. Officials are also tracking stocks at mills, dealers and traders.

Sharma expects sugar to stay firm in the near term. He says prices should ease once the sugarcane harvest peaks from October to November.

How long will the price pressure last

The latest data does not show a uniform rise across the food basket. Potato is down nearly 10% from a year ago. Tomato is marginally cheaper. Moong and masur have barely moved. Edible oil prices will decide how long the pinch lasts for most households.

“The real red flag would be if the price pressure starts broadening across the staples basket and remains elevated for several months,” Arora said. “For now, I would describe the situation as a food-price uptick that warrants monitoring, rather than a broad-based inflation resurgence,” she said.