Mustard Oil Expeller: Can FPOs Earn More by Processing Their Own Mustard?

Mustard farmers usually sell their harvested seed to traders or markets soon after harvest. But processing the same crop into edible oil and mustard cake can create additional value within the farming community. An ICAR-IARI-supported Farmer Producer Company in the National Capital Region provides a concrete example.

Hodal Farmers’ Producer Company Ltd. operates a community-based mustard oil expeller model that processes farmers’ mustard instead of selling all the seed as a raw commodity. ICAR reports that the model generated a net return of about ₹1.06 lakh per hectare.

The basic model is straightforward: mustard seed is collected, cleaned and processed through an oil expeller. The process produces two main saleable outputs, edible mustard oil and mustard cake.

According to ICAR, farmers in the model produce about 785 litres of oil from 1,900 kg of mustard seed per hectare. The reported oil recovery is around 37–38%, although actual recovery can vary with seed quality, moisture, machine settings and processing conditions.

The remaining mustard cake also has a market. ICAR reports around 1,178 kg of mustard cake from the same quantity of seed. The cake was valued at ₹3 per kg in the model and can be used as livestock feed, subject to appropriate quality and feed-use practices.

This makes the business different from simply selling oil. Both the primary product and a processing by-product contribute to revenue, helping the enterprise use more of the original crop.

How Much Can Farmers Earn?

ICAR estimates the combined gross revenue from the oil and mustard cake at about ₹1.56 lakh per hectare. The total reported processing and production cost was around ₹50,178, resulting in a net return of approximately ₹1.06 lakh per hectare.

The comparison with raw mustard is significant. ICAR reports a net return of around ₹58,500 when the crop is sold as raw seed. Under the community processing model, the reported net return rises to about ₹1.06 lakh.

That means value addition nearly doubles the reported net return in this particular model. Farmers should not treat these numbers as guaranteed profits because local mustard prices, oil prices, processing charges, electricity, packaging, labour and market demand can change the economics.

An oil expeller can require a sizeable investment, and an individual small farmer may not have enough mustard to keep the equipment working regularly. An FPO can aggregate produce from several members and operate the unit at a larger scale.

The Hodal Farmers’ Producer Company model shows how collective processing can turn a farm commodity into a locally marketed product. The FPO can organise raw material collection, processing, packaging and sales while farmers remain connected to the value chain.

Collective processing can also help spread fixed costs. Machinery, buildings, testing equipment and packaging facilities can be used across several farmers rather than remaining idle after one farmer’s harvest is processed.

What About Mustard Cake?

Mustard cake is an important part of the business calculation because processing does not mean all the value remains in the oil. The by-product can become another source of revenue when it meets the requirements of its intended use.

ICAR’s model values the mustard cake at ₹3 per kg and reports around 1,178 kg from 1,900 kg of seed. Farmers and FPOs should confirm local demand and applicable quality requirements before treating cake sales as a guaranteed income source.

The same principle applies to other crop-processing businesses. A profitable unit should try to reduce waste and find useful markets for suitable by-products rather than treating them only as disposal material.

What Does An FPO Need?

Before establishing an oil-processing unit, an FPO should calculate the quantity of mustard available from its members. A machine that receives insufficient raw material may remain underused, increasing the cost per litre of oil.

The FPO also needs to study the local market. Selling oil directly to consumers can require packaging, labelling, food-safety compliance, branding and distribution. Selling bulk oil to institutional buyers involves different requirements.

Quality control is another important part of the business. Oilseed moisture, seed cleanliness, storage conditions, extraction process and packaging can influence product quality. Food businesses must comply with applicable food-safety and regulatory requirements.

Government food-processing programmes can support eligible enterprises. Under PMKSY, the government provides financial assistance for food-processing and preservation infrastructure, including projects involving FPOs. As of June 2026, 1,256 PMKSY projects were operational or completed, benefiting about 37.76 lakh farmers.

The Ministry of Food Processing Industries also says FPOs can receive enhanced assistance under PMKSY, while the PM Formalisation of Micro Food Processing Enterprises scheme provides a 35% credit-linked subsidy up to ₹10 lakh for eligible micro food-processing enterprises.

FPOs should check the latest scheme guidelines, eligibility requirements and application windows before including government assistance in a business plan. Subsidy should be treated as potential support, not as guaranteed project funding.

Should Farmers Start Their Own Oil Unit?

Individual farmers should first calculate how much mustard they produce and how much oil could realistically be sold. For many smallholders, joining an FPO or using an existing community processing unit may be more practical than buying an expeller.

An FPO can also test the market before making a large investment. It can process a limited quantity, sell the oil locally and track consumer response, packaging costs, processing losses and actual margins.

If demand is strong and raw material supply is reliable, the enterprise can gradually expand. If the market is weak, farmers avoid locking large amounts of capital into machinery that may remain underused.

The Hodal FPO example shows why value addition can change the economics of an agricultural commodity. Instead of selling 1,900 kg of mustard seed as raw produce, the enterprise generated income from approximately 785 litres of oil and 1,178 kg of mustard cake.

The reported net return of ₹1.06 lakh per hectare compared with ₹58,500 from raw-seed sales suggests a significant value-addition opportunity. But the model depends on processing costs, local prices, machinery utilisation and the ability to sell the finished products.

For mustard-growing FPOs, a community oil expeller could be worth exploring where there is sufficient production and a dependable local market. The key is to build the business around actual supply and demand rather than buying machinery first.