India Expands Options, Indonesian Palm Oil Needs to Prepare

Indonesia should be grateful because for decades India has been one of the most important markets for national palm oil. Every year, millions of tons of crude palm oil (CPO) and its derivative products flow into the vast Indian market. Based on trade volume, since 2011 Indonesia has generally supplied more than half of India's palm oil imports, except in 2021 and 2022. This position is often seen as a guarantee that the Indian market will continue to be available for Indonesian palm oil.

This view needs to be reconsidered.

In recent weeks, market attention has indeed been focused on the increase in India's vegetable oil imports ahead of the festival season. This news has fueled optimism that CPO prices will strengthen. However, behind these short-term dynamics, a more significant change is underway: India is beginning to diversify its supply sources, increase flexibility among types of vegetable oils, and strengthen its domestic production.

In the past year, Indian buyers have started testing palm oil supplies from Latin America and Africa. Purchases from Colombia and Guatemala, for example, show that when price differences can cover logistics costs, non-traditional suppliers can gain a foothold in the Indian market. The volume is still small, but these transactions demonstrate that Southeast Asia's dominance is not entirely without competition.

Diversification is crucial. For a country that still meets more than half of its vegetable oil needs through imports, dependence on a small number of key suppliers is seen as a strategic risk. The experience of supply disruptions due to changes in export policies or increased domestic consumption in producing countries has been an important lesson for India to build a more resilient supply chain.

The second change is even more decisive, namely the National Mission on Edible Oils–Oil Palm (NMEO-OP) program. The Indian government is pushing for a massive expansion of domestic oil palm plantations so that part of the vegetable oil needs can be met from its own production. As of November 2025, India's oil palm area has reached approximately 620,000 hectares. The scale is not yet sufficient to replace millions of tons of imports, but this expansion shows that the strategy to reduce import dependence has moved from discourse to implementation. Although the results will not be visible in one or two years, this policy direction indicates that India is trying to reduce its reliance on imports.

On the other hand, the structure of India's vegetable oil consumption is also becoming more flexible. This flexibility was evident when the share of palm oil in India's vegetable oil imports temporarily fell from 56 percent to 43 percent after its price became more expensive compared to soybean oil and sunflower oil. This means that palm oil competition is no longer just with fellow CPO producers, but also with other increasingly competitive vegetable oil commodities.

At the same time, Indonesia is increasing CPO consumption for biodiesel programs and various downstream developments. The increase in CPO consumption for biodiesel and downstreaming provides benefits in the form of added value and strengthening energy security. However, this policy also brings consequences that need to be managed: the growth of domestic consumption can tighten export supply and reduce volume certainty for buyers. For India, this condition is one reason to expand supplier options and types of vegetable oils.

All these developments will not change the trade map in the near future. Indonesia still has advantages in productivity, industry scale, cost efficiency, and a logistics network that is difficult for other countries to match. However, today's advantages do not automatically become advantages at the end of this decade.

Therefore, the strategy towards India should focus on three things. First, ensuring supply certainty and consistency in export policies. Second, reducing costs by increasing productivity, among others, through accelerating smallholder oil palm replanting. Third, strengthening long-term trade cooperation with India, diplomacy, and product strategy adjustments. Without these steps, Indonesia's advantages may gradually be eroded by price changes and the widening range of buyer options.

The Indian market will still be one of the main destinations for Indonesian palm oil. However, the signal from New Delhi is clear: India is expanding its supply sources, increasing flexibility among types of vegetable oils, and building its domestic production. For Indonesia, this is not a reason to worry, but a warning not to equate India's large demand with market share certainty. Maintaining the market will increasingly be determined by price, productivity, supply reliability, and the ability to build long-term trade relationships.