How to Start a Mustard Oil Business: Complete Guide to Setup, Profit & Growth

Introduction
Mustard oil is one of the most widely consumed edible oils in South Asia, known for its pungent flavor, medicinal properties, and rising global demand. For entrepreneurs, the mustard oil business offers high potential due to low setup cost, steady raw material supply, and strong demand in both urban and rural markets.
In this guide, we will explain how to start a mustard oil business, covering everything from business planning, licensing, machinery setup, profit margins, and production ratios, to scaling into a successful mustard oil company.

Why Start a Mustard Oil Business?

Starting a mustard oil business is a profitable opportunity because the demand is increasing with growing health awareness, the rising adoption of Ayurveda, and its everyday use in cooking. The market opportunity is especially strong in India, Pakistan, Bangladesh, and Nepal, while global demand is expanding as more consumers look for natural and traditional oils. Since mustard oil is a daily-use essential, it ensures consistent sales throughout the year. The rising trend of cold-pressed and organic mustard oil creates premium opportunities for higher margins, while the low to medium investment requirements make it an excellent choice for small-scale entrepreneurs who want to enter the edible oil industry with manageable risk and strong growth potential.

Key points:

• Mustard oil is a daily-use essential, ensuring steady sales.
• Growing demand due to health awareness, Ayurveda, and cooking needs
• Rising interest in cold-pressed and organic mustard oil adds premium opportunities.
• Low to medium investment makes it ideal for small-scale entrepreneurs.
• Strong market opportunity in India, Pakistan, Bangladesh, Nepal, with global expansion

Step 1: Make a Mustard Oil Business Plan

A well-structured mustard oil business plan is essential to calculate your investment, raw material needs, and profit margins before launching operations. It helps entrepreneurs analyze the market, choose the right setup size, and identify the machinery, licenses, and marketing strategies required to run a profitable mustard oil venture.

Your mustard oil business plan should include:

Market Research

Before setting up your unit, conduct thorough market research. Identify local and regional demand, analyze your competitors’ pricing strategies, and compare wholesale vs. retail markets. This helps you decide whether to target direct consumers, grocery stores, or bulk buyers.

Location & Land

Choosing the right location is critical for smooth operations. A small mustard oil unit can start within 500–1,000 sq ft, while a medium or large-scale setup requires more land for machinery, storage, and packaging. Proximity to raw material sources and markets lowers transportation costs and boosts profitability.

Machinery & Equipment

The backbone of any mustard oil business is its machinery and equipment. Essential machines include oil expellers for extraction, filters for refining, and packaging machines to prepare bottles or pouches. Depending on your budget, you can opt for semi-automatic or fully-automatic setups to increase efficiency.

Raw Material Procurement

The quality of your mustard seeds directly affects oil output and purity. Establish reliable connections with local farmers or buy in bulk from wholesale markets to ensure steady supply at competitive prices. Sourcing fresh and high-grade seeds builds trust and improves your brand reputation.

Licenses & Registration

To run your mustard oil unit legally, you need proper licenses and registrations. Key approvals include FSSAI for food safety compliance, GST registration for taxation, and a trade license from local authorities. Meeting these legal requirements ensures smooth business operations and consumer trust.

Cost & Profit Projection

Calculating your cost and profit projections is vital to estimate the return on investment (ROI). Consider machinery costs, raw materials, labor, utilities, and packaging expenses. A well-prepared financial plan helps you forecast profits and secure loans or investments, if needed.

Marketing Strategy

A strong marketing strategy can set your mustard oil brand apart in a competitive market. Focus on branding, attractive packaging, and digital promotions. Build partnerships with grocery stores, wholesalers, and online platforms to expand your distribution network and increase visibility.

Step 2: Licensing & Legal Requirements

Getting the right licenses and legal approvals is mandatory before starting a mustard oil business. These registrations not only ensure compliance with government regulations but also help in building customer trust and brand credibility.

Licenses required for mustard oil business:

FSSAI License (Food Safety and Standards Authority of India)

An FSSAI license is the most important approval for selling edible mustard oil. It certifies that your oil meets food safety and hygiene standards, making it legally fit for consumption. Whether you run a small unit or a large refinery, an FSSAI registration is mandatory.

GST Registration

Every mustard oil business dealing in production, wholesale, or retail must get GST registration. It allows you to legally trade across states, claim input tax credits, and comply with taxation rules. A GST number is also essential for working with distributors and supermarkets.

Trade License

A trade license from your local municipal authority grants permission to operate your oil mill, storage unit, or packaging plant. It ensures that your business location complies with zoning regulations and local safety guidelines.

MSME / Udyog Aadhaar

If you are starting a small-scale mustard oil unit, registering under MSME (Micro, Small & Medium Enterprises) or Udyog Aadhaar provides multiple benefits. These include easy access to bank loans, government subsidies, and reduced electricity rates in some states.

Pollution Control Board NOC

In many states, you must obtain a Pollution Control Board No Objection Certificate (NOC) before setting up your oil extraction unit. This ensures your mustard oil business follows environmental safety norms and prevents air, water, or noise pollution during production.

Trademark Registration

A trademark registration helps protect your mustard oil brand name, logo, and packaging design from imitation. With rising competition in the edible oil industry, trademarking ensures your brand identity remains unique and legally safeguarded.

Summary: Obtaining these licenses—FSSAI, GST, Trade License, MSME, Pollution NOC, and Trademark—not only makes your mustard oil business legally compliant but also builds customer trust and strengthens your market position.

Without proper licensing, mustard oil cannot be sold legally in retail or wholesale markets.

Step 3: Raw Materials & Production Capacity

The success of a mustard oil business largely depends on the quality of raw materials and the efficiency of the extraction method. Choosing the right mustard seed variety and production process directly affects the oil yield, taste, and profit margin.

Mustard Seeds (Different Varieties)

Mustard oil is extracted from different seed varieties such as black mustard (Brassica nigra), brown mustard (Brassica juncea), and white/yellow mustard (Sinapis alba). Black and brown mustard seeds generally provide higher oil content and stronger flavor, while yellow mustard seeds are lighter in taste and have lower oil yield. Selecting the right seed type allows producers to cater to regional preferences and market demand.

Solvent vs. Cold Press Methods

Two primary methods are used for mustard oil extraction—solvent extraction and cold pressing (kachi ghani).

• Solvent extraction is more suitable for large-scale industries, giving maximum oil yield but requiring chemical solvents and heavy investment.
• Cold pressing (kachi ghani or wooden press method) retains natural aroma, flavor, and nutrients, making it more popular in premium and health-conscious markets.

Extraction Rate

The oil extraction rate depends on seed variety, processing method, and machinery used. On average, 100 kg of mustard seeds yield around 32–36 liters of oil and 60–65 kg of oil cake (a valuable by-product used as cattle feed or fertilizer). Cold pressing usually gives slightly lower yields than solvent extraction but produces higher-quality oil.

How Much Oil from 1 kg Mustard Seeds?

From 1 kg of mustard seeds, about 300–350 ml of mustard oil is extracted, depending on seed quality, variety, and extraction method. The remaining by-product is mustard oil cake, used as cattle feed or fertilizer.

Density of Mustard Oil

The density of mustard oil is approximately 0.92 kg per litre. This means 1 litre of mustard oil weighs around 920 grams, slightly lighter than water.

How Much Mustard for 1 Litre Oil?

To produce 1 litre of mustard oil, you need about 2.5–3 kg of mustard seeds, depending on seed quality and extraction method (cold press vs solvent extraction).

Example Calculation – 1 Ton Mustard Seeds

If you process 1,000 kg (1 ton) of mustard seeds, you can expect:

• ~300 litres of mustard oil
• ~700 kg of mustard oilcake (valuable by-product)

This calculation highlights why mustard oil businesses remain profitable—the by-product itself has a strong market demand.

Step 4: Machinery & Manufacturing Setup

Setting up a mustard oil business requires the right set of machinery and equipment to ensure smooth operations and high-quality production. From seed cleaning to final packaging, each stage of the process needs specialized machines that determine efficiency, yield, and overall profit margin.

Basic Machinery for Mustard Oil Production

• Mustard Seed Cleaning Machine – Removes dust, stones, and impurities from seeds before processing.
• Oil Expeller (Cold-Press or Hot-Press) – The core machine that extracts oil from mustard seeds using either traditional cold-press (kachi ghani) or modern hot-press methods.
• Filter Press – Ensures pure, clear oil by removing solid particles and impurities after extraction.
• Storage Tanks – Stainless steel or food-grade tanks are used for safe bulk storage of mustard oil before packaging.
• Packaging Machine – Automates filling of oil into bottles, pouches, or tins, ensuring consistency and efficiency.

Estimated Machinery Cost

• Small Unit (₹3–5 lakhs): Suitable for startups and local distribution, includes basic expeller, filter, and manual packaging.
• Medium Unit (₹10–25 lakhs): Semi-automatic setup with higher capacity expellers, filter presses, storage, and automated packaging.
• Large-Scale Unit (₹50+ lakhs): Fully automated plant with multiple expellers, refining units, advanced filtration, and large packaging lines for mass production.

Investing in the right machinery ensures higher oil yield, better quality control, and long-term business sustainability.

Step 5: Cost & Profit Margin in Mustard Oil Business

The mustard oil business offers attractive profit margins ranging from 25% to 40%, depending on the scale of operations, branding, and distribution strategy. With rising demand for cold-pressed and organic oils, entrepreneurs can significantly increase their earnings.

Cost Breakdown (Small Unit Example)

For a small-scale unit processing 1 ton of mustard seeds, the approximate costs are:

• Raw Mustard Seeds: ₹50,000 (for 1 ton)
• Machinery Running Cost: ₹5,000
• Packaging & Labor: ₹10,000
• ➡️ Total Cost = ₹65,000

Output & Revenue

From 1 ton of mustard seeds, you can expect:

• Mustard Oil: ~300 litres
• Selling Price: ₹150/litre → ₹45,000 revenue
• Oilcake (By-product): ~700 kg
• Selling Price: ₹30/kg → ₹21,000 revenue
• ➡️ Total Sales = ₹66,000

Profit Margin

• ✅ Gross Profit = ₹66,000 – ₹65,000 = ₹1,000
• ✅ Profit Margin = 25–30% (higher when scaled or branded)

If marketed as branded cold-pressed organic mustard oil, selling at ₹250–300/litre, the profit margin can double, making it one of the most lucrative segments in the edible oil industry.

Cold-pressed organic mustard oil can be sold at ₹250–300 per litre, doubling profit margins.

Step 6: Branding, Marketing & Distribution

Strong branding and marketing strategies play a crucial role in increasing visibility and building customer trust in the mustard oil business. Since mustard oil is a daily-use product with growing demand across India and abroad, choosing the right sales channels and distribution strategy ensures higher revenue and long-term growth.

🛒 Sales Channels for Mustard Oil

• Wholesale Supply: Distribute bulk mustard oil to local kirana shops, restaurants, and wholesalers for steady sales.
• Retail & Supermarkets: Sell branded mustard oil bottles and pouches in retail shops and large supermarkets to build a brand presence.
• Online Sales: Leverage e-commerce platforms like Amazon, Flipkart, BigBasket, and your own D2C website for a wider consumer base.
• Export Opportunities: Demand for mustard oil is rising in Europe, the USA, and the Middle East, creating lucrative export markets.

🎯 Marketing Strategies

• Local Market Penetration: Establish tie-ups with kirana stores, wholesalers, and small distributors for consistent cash flow.
• Brand Identity: Use attractive packaging, labels, and storytelling (e.g., “cold-pressed,” “Ayurvedic,” “organic”) to appeal to health-conscious consumers.
• Digital Marketing: Run social media campaigns, SEO blogs, and influencer promotions to educate consumers about mustard oil’s health benefits.
• Ayurvedic & Wellness Branding: Highlight mustard oil’s role in Ayurveda, massage therapy, and natural wellness to capture the premium market.

Step 7: Scaling into a Mustard Oil Company

The mustard oil business is not just a small-scale opportunity—it can evolve into a full-fledged mustard oil company with the right investments, branding, and expansion strategies.

How to Scale a Mustard Oil Business into a Company

Invest in Refining & Packaging Automation

• Installing advanced refining units ensures longer shelf life and international quality standards.
• Automated packaging lines help in mass production and reduce manual errors.

Launch Multiple SKUs (Stock Keeping Units)

• Offer diverse pack sizes: 200 ml trial packs, 500 ml, 1 litre bottles, and 5 litre family packs.
• This attracts both budget buyers and bulk consumers.

Develop Export-Focused Production

• Secure FSSAI, ISO, HACCP, and FDA certifications for compliance.
• Focus on cold-pressed organic mustard oil, which has high demand in Europe, USA, and Middle East.

Expand into Value-Added Products

• Mustard Cake Fertilizer: Rich in nitrogen and organic nutrients for farming.
• Cold-Pressed Organic Oil: Premium segment targeting health-conscious customers.
• Mustard Oil Blends: Innovative products like mustard-olive oil or mustard-sesame oil for gourmet use.

Build a Brand Identity

• Highlight Ayurvedic heritage, purity, and health benefits.
• Use storytelling in packaging: “From farm to bottle” concept.
• Collaborate with nutritionists and chefs for marketing endorsements.

Insight: With rising global demand for healthy cooking oils, a mustard oil business that begins locally can scale into a national brand and then expand into international markets.

Challenges in Mustard Oil Business

Running a mustard oil business comes with unique challenges that entrepreneurs must address to stay profitable and competitive. These challenges can be managed with the right strategies. Understanding these issues in advance helps in creating a strong mustard oil business plan and long-term growth strategy.

Key Challenges and their solutions:

1. Seasonal Availability of Mustard Seeds

Challenge: Mustard is harvested only once or twice a year, creating seasonal raw material shortages.
Solution: Build long-term contracts with farmers, invest in storage facilities, and diversify sourcing regions to ensure year-round availability.

2. Price Fluctuations Due to Agriculture Cycles

Challenge: Mustard seed prices fluctuate with weather conditions, crop yield, and demand-supply gaps, directly impacting profit margins.
Solution: Use forward contracts, bulk purchasing during harvest season, and explore subsidies or government schemes to stabilize procurement costs.

3. Competition from Refined Soybean & Sunflower Oil

Challenge: Many consumers shift to cheaper refined oils, reducing mustard oil’s market share.
Solution: Highlight mustard oil’s health benefits, Ayurvedic uses, and natural purity in branding. Focus on premium cold-pressed and organic segments where consumers pay more for quality.

4. Need for Strong Branding to Compete with Established Players

Challenge: New businesses struggle to stand out against popular brands in both retail and export markets.
Solution: Build a unique brand identity—such as “100% organic mustard oil” or “Ayurvedic wellness oil.” Use digital marketing, packaging innovations, and storytelling to connect with health-conscious and diaspora consumers.

By tackling these challenges strategically, entrepreneurs can turn risks into opportunities and scale their mustard oil business into a profitable company.

Conclusion

The mustard oil business has high long-term potential due to rising global demand, shifting health trends, and increasing consumer preference for natural oils. It stands out as one of the most profitable ventures in the edible oil sector. With the right business plan, legal licenses, and strong branding, entrepreneurs can start from a small-scale unit and expand into a recognized mustard oil company.

Whether you focus on wholesale crude mustard oil for industrial buyers or premium cold-pressed organic mustard oil for health-conscious customers, the market offers scalable and sustainable opportunities. With proper strategy, this business not only ensures strong profit margins but also contributes to the growing movement toward natural and Ayurvedic wellness oils.

FAQs on Mustard Oil Business

Q1: How much oil is produced from 1 kg of mustard?

A1: From 1 kg of mustard seeds, about 300–350 ml of mustard oil is extracted, depending on seed quality, variety, and extraction method. The remaining by-product is mustard oil cake, used as cattle feed or fertilizer.

Q2: How much mustard is required for 1 litre of oil?

A2: It takes around 2.5 to 3.5 kg of mustard seeds to produce 1 litre of mustard oil, depending on the seed variety, oil content, and extraction process used.

Q3: How much is 1 litre of mustard oil in kg?

A3: 1 litre of mustard oil weighs about 0.91–0.93 kg, since its density is slightly lower than water. The exact weight may vary with temperature and purity of the oil.

Q4: Is a licence required for mustard oil business?

A4: Yes, a licence is required to start a mustard oil business. You need an FSSAI licence, GST registration, trade licence, and local permits. For exports, an import-export code (IEC) from DGFT is also mandatory.

Q5: What is the profit margin in mustard oil business?

A5: The profit margin in the mustard oil business is usually 25% to 35%, depending on seed cost, oil yield, packaging, and market demand. With proper branding and exports, margins can go even higher.

Q6: How to make a mustard oil company?

A6: To start a mustard oil company, you need a business plan, FSSAI licence, factory setup with oil expellers, raw mustard seeds, packaging unit, and distribution network. Proper branding and marketing help grow the business profitably.

Q7: What is the raw material for mustard oil?

A7: The main raw material for mustard oil is mustard seeds, available in three key varieties: black mustard (Brassica nigra), brown mustard (Brassica juncea), and white/yellow mustard (Brassica alba). These seeds contain about 30–38% oil depending on seed quality.

Q8: How to export mustard oil?

A8: To export mustard oil, you need an export license, FSSAI approval, quality certification, and compliance with destination country regulations. Partner with reliable distributors, follow packaging standards, and register with the DGFT for export documentation.

Q9: Who is the largest producer of mustard oil?

A9: India, Bangladesh, Nepal, and Pakistan are the largest producers of mustard oil accounts for the majority of global mustard seed cultivation and oil production.