Palm Oil Markets: India’s NMEO-OP could be a bigger influence than EUDR
Heading into 2026, a review of the tumultuous year in commodities trading in 2025 shows Trump’s tariffs as having the biggest impact on global trade.
For the palm oil industry, the biggest factor in trade could come not from green regulations like EUDR but from India’s mission to be self-reliant on edible oils, the NMEO-OP.
For the palm oil industry, the biggest factor in trade could come not from green regulations like EUDR but from India’s mission to be self-reliant on edible oils, the NMEO-OP.
PATH TO PALM OIL
WHITE PAPER
SELF-SUFFICIENCY IN INDIA
The EU’s much vaunted Deforestation Regulations the EUDR will fail its mission to reduce deforestation according to experts including French Agricultural Research Centre for International Development (CIRAD) Southeast Asia regional director Professor Alain Rival who warned that:
“New regulations introduced by the European Union (EU), may prompt some palm oil producers to divert exports to markets with more lenient standards.”
The diversion of green goods from the EU results in what M Rajshekar describes as “rolling deforestation” where green certified goods are shipped to the EU while uncertified goods of the same commodity are shipped to less discriminating markets like India, China or even African countries.
“With that, all one gets is rolling deforestation. For this reason, EUDR is more effective as a trade barrier than an anti-deforestation measure.”
The EUDR could turn out to be a toothless tiger even as a trade barrier if the top two palm oil producing countries in Indonesia and Malaysia find less demanding markets.
The US market under the Trump administration is turning out to be such a market for Indonesia which is insisting that Trump offers Indonesian palm oil the same preferential tariff the US has granted Malaysia.
The latest news on the issue indicates that Indonesia will be granted the same deal by the US when the trade deal is signed in January 2026.
While palm oil producing countries fuss over market access to the EU and US, India’s development of its domestic palm oil industry poses a much greater threat to Malaysian and Indonesian exports of palm oil.
Data on country imports of palm oil by Index Mundi shows India imports as much palm oil than both the EU and US combined.
This begs the question why Indonesia and Malaysia are not doing more to protect their market shares in India.
The answer could be in their recognition of the fact that India could one day soon be self reliant on palm oil through the NMEO-OP program.
India’s NMEO-OP
According to official sources on palm oil production in India:
“The National Mission on Edible Oils (NMEO) embodies India’s commitment to realizing the vision of Atmanirbhar Bharat by transforming the edible oil sector from an import-dependent to a self-reliant one.
Through focused interventions in oil palm expansion, yield improvement in traditional oilseeds, assured pricing mechanisms, advanced seed technologies, and coordinated institutional implementation, the mission seeks to build a resilient and competitive domestic edible oil value chain.
By reducing import dependence, the mission not only conserves our foreign exchange but also strengthens rural economies by empowering farmers with better income opportunities, access to quality inputs, and market linkages. Moreover, it reinforces India’s long-term goals of achieving food and nutritional security, promoting rural development, and fostering sustainable agricultural growth..” PIBGOVIN
These are grand ambitions by India to produce palm oil domestically to offset FOREX losses in edible oil imports. As 3F Palm Oil puts it.
“At a national scale, increasing domestic production of palm oil can reduce India’s edible oil import bill, which stood at ₹1.57 lakh crore in FY2023, according to data from the Ministry of Consumer Affairs. By localizing production, India can strengthen its agricultural economy, reduce forex outflow, and ensure that more value addition—from cultivation to processing—takes place within its borders. Furthermore, oil palm expansion in regions like the Northeast and Andaman & Nicobar Islands provides income opportunities in underdeveloped areas, fuelling balanced regional development."
This makes the NMEO-OP program a bigger threat to Indonesia and especially export reliant Malaysia than any US tariffs or EU trade barriers in EUDR but is it?
It is possible that the top two palm oil producing countries expect the NMEO-OP to fail its mission despite India’s allocation of $1.4 billion towards self sufficiency in vegetable oils.
The NMEO–Oil Palm is close to its first target of 6.5 lakh hectares nationwide as data shows 6.20 hectares under palm oil cultivation as of November 2025.
Crude Palm Oil (CPO) production has increased to 3.80 lakh tonnes in 2025 but India may yet find out that it is cheaper to import than to produce palm oil.
At this point, it could be argued that India should weigh its FOREX gains from rice exports which is more than its FOREX losses from imported vegetable oils.
The problem though is that India’s rice cultivation is being threatened by a looming water crisis.
A white paper prepared by Solidaridad Asia in collaboration with The Solvent Extractors’ Association of India and Asian Palm Oil Alliance suggested that India could use up to 16 million hectares of marginal rice farms to expand its oil palm areas.
Switching from rice to palm oil
Where water scarcity is becoming a problem for India’s major agricultural crops, Solidaridad Asia pitched palm oil as having one of the lowest water footprints in the world compared to soybean, sunflower or mustard.
This flies in the face of what critics have said about India’s NMEO-OP. That it is a thirsty crop with a long gestation period which challenges the government’s ambitions.
CSPO Watch reached out to an expert on the challenges faced by Indian farmers for his opinions on the NMEO-OP and asked whether NMEO-OP is failing.
Dr. Suresh Motwani is the General Manager of Solidaridad Asia with over 20 years of experience in driving sustainability in agricultural supply chains.
“Thank you for your thoughtful questions. They go to the heart of India’s edible oil challenge and the ongoing debate around NMEO-OP.
From my assessment, based on field experience, engagement with implementing agencies, industry bodies, and state governments, the NMEO is not failing, but it is clearly under strain and progressing slower than its original ambition, particularly on the production side.
Palm oil expansion in India faces structural realities that differ sharply from Indonesia and Malaysia:
That said, the programme’s challenges are more institutional and agronomic than conceptual.
What can India realistically do to meet its goals?
In my view, India should recalibrate NMEO-OP along four pragmatic lines, rather than treating palm oil as a silver bullet:
1. Shift from aggressive expansion to smart intensification
Focus on right geographies (water-secure zones, irrigation command areas, suitable soils), better planting material, and yield stabilisation, rather than headline acreage numbers.
2. Embed smallholders through risk-sharing, not price guarantees alone
MSP-like mechanisms for palm oil could indeed become fiscally risky, especially if global prices soften due to policy or supply shifts in Indonesia/Malaysia.
Instead, income stability should come from:
3. Treat palm oil as one pillar of edible oil security not the only one
India’s strength undeniably lies in annual crops like mustard, soybean, groundnut, rice-bran oil, and even export-oriented cereals.
A diversified strategy that improves productivity in domestic oilseeds, leverages exports of grains and value-added agri-products and reduces avoidable imports is fiscally and politically more resilient than over-reliance on palm oil alone.
4. Align sustainability and geopolitics with economics
Global palm oil markets are increasingly shaped by sustainability norms, trade regulations, and geopolitics.
India’s advantage lies in developing deforestation-free, smallholder-based palm oil, not in competing on lowest cost with Indonesia or Malaysia.
On FOREX and price risk
You raise a very valid concern.
If international prices fall sharply, a domestic price-support mechanism for palm oil could indeed cost India more than it saves in FOREX.
This is precisely why NMEO-OP should be seen as a long-term strategic hedge, not a short-term import-substitution tool and why productivity, not protection, must be its backbone.
In summary, India should:
Palm oil has a role in India’s edible oil future but not at the cost of fiscal prudence or agronomic realism.
I appreciate the opportunity to reflect on this, and I look forward to continuing this discussion.”
CSPO Watch thanks Dr. Suresh Motwani for the keen insights into the challenges facing India’s ambitions towards a self reliant agricultural economy.
Published January 04, 2026
“New regulations introduced by the European Union (EU), may prompt some palm oil producers to divert exports to markets with more lenient standards.”
The diversion of green goods from the EU results in what M Rajshekar describes as “rolling deforestation” where green certified goods are shipped to the EU while uncertified goods of the same commodity are shipped to less discriminating markets like India, China or even African countries.
“With that, all one gets is rolling deforestation. For this reason, EUDR is more effective as a trade barrier than an anti-deforestation measure.”
The EUDR could turn out to be a toothless tiger even as a trade barrier if the top two palm oil producing countries in Indonesia and Malaysia find less demanding markets.
The US market under the Trump administration is turning out to be such a market for Indonesia which is insisting that Trump offers Indonesian palm oil the same preferential tariff the US has granted Malaysia.
The latest news on the issue indicates that Indonesia will be granted the same deal by the US when the trade deal is signed in January 2026.
While palm oil producing countries fuss over market access to the EU and US, India’s development of its domestic palm oil industry poses a much greater threat to Malaysian and Indonesian exports of palm oil.
Data on country imports of palm oil by Index Mundi shows India imports as much palm oil than both the EU and US combined.
This begs the question why Indonesia and Malaysia are not doing more to protect their market shares in India.
The answer could be in their recognition of the fact that India could one day soon be self reliant on palm oil through the NMEO-OP program.
India’s NMEO-OP
According to official sources on palm oil production in India:
“The National Mission on Edible Oils (NMEO) embodies India’s commitment to realizing the vision of Atmanirbhar Bharat by transforming the edible oil sector from an import-dependent to a self-reliant one.
Through focused interventions in oil palm expansion, yield improvement in traditional oilseeds, assured pricing mechanisms, advanced seed technologies, and coordinated institutional implementation, the mission seeks to build a resilient and competitive domestic edible oil value chain.
By reducing import dependence, the mission not only conserves our foreign exchange but also strengthens rural economies by empowering farmers with better income opportunities, access to quality inputs, and market linkages. Moreover, it reinforces India’s long-term goals of achieving food and nutritional security, promoting rural development, and fostering sustainable agricultural growth..” PIBGOVIN
These are grand ambitions by India to produce palm oil domestically to offset FOREX losses in edible oil imports. As 3F Palm Oil puts it.
“At a national scale, increasing domestic production of palm oil can reduce India’s edible oil import bill, which stood at ₹1.57 lakh crore in FY2023, according to data from the Ministry of Consumer Affairs. By localizing production, India can strengthen its agricultural economy, reduce forex outflow, and ensure that more value addition—from cultivation to processing—takes place within its borders. Furthermore, oil palm expansion in regions like the Northeast and Andaman & Nicobar Islands provides income opportunities in underdeveloped areas, fuelling balanced regional development."
This makes the NMEO-OP program a bigger threat to Indonesia and especially export reliant Malaysia than any US tariffs or EU trade barriers in EUDR but is it?
It is possible that the top two palm oil producing countries expect the NMEO-OP to fail its mission despite India’s allocation of $1.4 billion towards self sufficiency in vegetable oils.
The NMEO–Oil Palm is close to its first target of 6.5 lakh hectares nationwide as data shows 6.20 hectares under palm oil cultivation as of November 2025.
Crude Palm Oil (CPO) production has increased to 3.80 lakh tonnes in 2025 but India may yet find out that it is cheaper to import than to produce palm oil.
At this point, it could be argued that India should weigh its FOREX gains from rice exports which is more than its FOREX losses from imported vegetable oils.
The problem though is that India’s rice cultivation is being threatened by a looming water crisis.
A white paper prepared by Solidaridad Asia in collaboration with The Solvent Extractors’ Association of India and Asian Palm Oil Alliance suggested that India could use up to 16 million hectares of marginal rice farms to expand its oil palm areas.
Switching from rice to palm oil
Where water scarcity is becoming a problem for India’s major agricultural crops, Solidaridad Asia pitched palm oil as having one of the lowest water footprints in the world compared to soybean, sunflower or mustard.
This flies in the face of what critics have said about India’s NMEO-OP. That it is a thirsty crop with a long gestation period which challenges the government’s ambitions.
CSPO Watch reached out to an expert on the challenges faced by Indian farmers for his opinions on the NMEO-OP and asked whether NMEO-OP is failing.
Dr. Suresh Motwani is the General Manager of Solidaridad Asia with over 20 years of experience in driving sustainability in agricultural supply chains.
“Thank you for your thoughtful questions. They go to the heart of India’s edible oil challenge and the ongoing debate around NMEO-OP.
From my assessment, based on field experience, engagement with implementing agencies, industry bodies, and state governments, the NMEO is not failing, but it is clearly under strain and progressing slower than its original ambition, particularly on the production side.
Palm oil expansion in India faces structural realities that differ sharply from Indonesia and Malaysia:
- highly fragmented smallholder landholdings
- long gestation periods (4–5 years)
- competing crop choices,
- and state-level political sensitivities around land use and farmer incentives.
That said, the programme’s challenges are more institutional and agronomic than conceptual.
What can India realistically do to meet its goals?
In my view, India should recalibrate NMEO-OP along four pragmatic lines, rather than treating palm oil as a silver bullet:
1. Shift from aggressive expansion to smart intensification
Focus on right geographies (water-secure zones, irrigation command areas, suitable soils), better planting material, and yield stabilisation, rather than headline acreage numbers.
2. Embed smallholders through risk-sharing, not price guarantees alone
MSP-like mechanisms for palm oil could indeed become fiscally risky, especially if global prices soften due to policy or supply shifts in Indonesia/Malaysia.
Instead, income stability should come from:
- assured FFB procurement,
- intercropping support in early years,
- extension services,
- and access to affordable credit and insurance.
3. Treat palm oil as one pillar of edible oil security not the only one
India’s strength undeniably lies in annual crops like mustard, soybean, groundnut, rice-bran oil, and even export-oriented cereals.
A diversified strategy that improves productivity in domestic oilseeds, leverages exports of grains and value-added agri-products and reduces avoidable imports is fiscally and politically more resilient than over-reliance on palm oil alone.
4. Align sustainability and geopolitics with economics
Global palm oil markets are increasingly shaped by sustainability norms, trade regulations, and geopolitics.
India’s advantage lies in developing deforestation-free, smallholder-based palm oil, not in competing on lowest cost with Indonesia or Malaysia.
On FOREX and price risk
You raise a very valid concern.
If international prices fall sharply, a domestic price-support mechanism for palm oil could indeed cost India more than it saves in FOREX.
This is precisely why NMEO-OP should be seen as a long-term strategic hedge, not a short-term import-substitution tool and why productivity, not protection, must be its backbone.
In summary, India should:
- continue NMEO-OP, but with tempered expectations
- strengthen oilseed ecosystems alongside palm oil
- avoid rigid MSP-style price commitments for palm
- and focus on resilience, diversification, and farmer risk mitigation.
Palm oil has a role in India’s edible oil future but not at the cost of fiscal prudence or agronomic realism.
I appreciate the opportunity to reflect on this, and I look forward to continuing this discussion.”
CSPO Watch thanks Dr. Suresh Motwani for the keen insights into the challenges facing India’s ambitions towards a self reliant agricultural economy.
Published January 04, 2026