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

This report analyzes the rapeseed/mustard oil sector in India, focusing on the challenges of price volatility and the effectiveness of national revenue management strategies. It examines the sector's importance to the Indian economy, the dependence of rural households and the government on its revenues, and provides recommendations for stabilizing incomes through productivity gains, futures market development, and tax rationalization.

• 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 of rapeseed/mustard seed is concentrated in a few states, with Rajasthan producing 45 per cent, Haryana 15 per cent, Uttar Pradesh 13 per cent, and West Bengal 8 per cent. Peak production reached seven million tonnes in 2005–06.
• The sector is characterized by high fragmentation and rural dependence; approximately 90 per cent of producers are small oil mills. 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 Indian government generates revenue from the sector through various channels, including mandi cess (ranging from 1 to 2 per cent), excise duties (8 per cent on branded, packaged oils), and value added tax (VAT) for edible oils at 4 per cent. The government also applies a bound and applied tariff duty of 75 per cent on rapeseed/mustard seed imports, though a tariff-rated quota allows 150,000 tonnes per year at a reduced 45 per cent duty.
• Wholesale prices of rapeseed/mustard seed increased by 30 per cent over a 12-year study period, with significant volatility driven by supply-demand mismatches, droughts (notably in 2002–03), and the seasonal nature of production. Prices typically drop during peak arrival periods in March, April, and May.
• The government uses a Minimum Support Price (MSP) administered through the National Agricultural Cooperative Marketing Federation of India (NAFED) to prevent distress sales. While wholesale prices are often higher than the MSP, NAFED intervened during periods of excess supply in 1992–93, 1993 , and 2000‑01, and procured approximately 2.019 million tonnes in 2004–05.
• The report recommends several measures to stabilize the sector: increasing productivity through better seeds and extraction facilities, expanding farmer participation in the National Multi Commodity Exchange (NMCE) to hedge risk, and rationalizing the tax structure to reduce evasion and costs. It also suggests strengthening branding to prevent the adulteration of rapeseed/mustard oil with cheaper oils like palm oil.

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} }