Commodity Revenue Management: India’s rapeseed/mustard oil sector

The report analyzes the rapeseed/mustard oil sector in India, highlighting its economic importance and the challenges posed by price volatility. It examines various government interventions, including Minimum Support Prices (MSP) and the Public Distribution System (PDS), while recommending improvements in productivity, futures market regulation, and tax rationalization to stabilize revenues for farmers and the state.

• India is the world's third largest producer of rapeseed/mustard seed, contributing 12 per cent of global production. The crop is the country's second most important edible oil after groundnut, accounting for nearly one-third of India's total oil production.
• Production is highly concentrated in a few states, with Rajasthan accounting for 45 per cent, Haryana 15 per cent, Uttar Pradesh 13 per cent, and West Bengal 8 per cent of total production. The sector is largely unorganized, with approximately 90 per cent of producers operating as small oil mills.
• Wholesale prices of rapeseed/mustard seed increased by 30 per cent over a 12-year study period, though they were subject to significant fluctuations. Volatility is driven by domestic supply-demand mismatches, seasonal production peaks, vulnerability to inclement weather, and the presence of speculators.
• The government uses a Minimum Support Price (MSP) administered through the National Agricultural Cooperative Marketing Federation of India (NAFED) to prevent distress sales. While the MSP has increased since 1991, NAFED has faced funding shortfalls from the Reserve Bank of India, leading to delayed payments for farmers.
• Price volatility disproportionately affects small and marginal farmers, who cannot quickly adjust production to market forces. In Rajasthan, 45 per cent of producers are marginal farmers with landholdings under two hectares, and over 60 per cent of these families live below the poverty line.
• The report identifies several systemic inefficiencies, including a lack of transparency in regulated mandis where farmers face illegal deductions and high commission charges. Additionally, an estimated 70 per cent of edible oil is traded in unorganized markets, resulting in significant lost tax revenue for the government.

APA

Pahariya, N., & Mukherjee, C. (2007). Commodity Revenue Management: India’s rapeseed/mustard oil sector. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/trade_price_case_rapeseed.pdf

Chicago

Pahariya, N.C., and Chandan Mukherjee. Commodity Revenue Management: India’s rapeseed/mustard oil sector. International Institute for Sustainable Development, 2007. https://www.iisd.org/system/files/publications/trade_price_case_rapeseed.pdf.

Wikipedia

{{cite report |last1=Pahariya |first1=N.C. |last2=Mukherjee |first2=Chandan |title=Commodity Revenue Management: India’s rapeseed/mustard oil sector |publisher=International Institute for Sustainable Development |date=June 2007 |url=https://www.iisd.org/system/files/publications/trade_price_case_rapeseed.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{pahariya2007commodity, author = {Pahariya, N.C. and Mukherjee, Chandan}, title = {{Commodity Revenue Management: India’s rapeseed/mustard oil sector}}, institution = {International Institute for Sustainable Development}, year = {2007}, month = jun, url = {https://www.iisd.org/system/files/publications/trade_price_case_rapeseed.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }