I'm pretty confident that mustard oil is nutritionally the best oil there is, although this is still controversial in Europe and the USA. Its disappearance from the Indian marketplace was a disaster, and it hasn't completely regained its dominant position in the Indian market even now the ban has been lifted. It's still hard to get in some parts of India. It's less clear-cut whether this is really a scandal, although it may well be.
In Europe, Canada and the USA (possibly elsewhere, I don't know), mustard oil offered for sale must display a warning, something like Not for Human Consumption, or For External Use Only. This has been variously attributed to the likelihood of mustard oil being contaminated with argemone seed oil, and the fact that it naturally contains high levels of erucic acid.
There have been outbreaks of epidemic dropsy in India, where consumption of contaminated mustard oil has led to numerous deaths. The contamination has occasionally been with argemone seed oil, but more often simply with inedible industrial oils.
There have been suggestions that at least some of these outbreaks have been engineered deliberately as part of a campaign to get the previously very popular mustard oil banned, in order to make room in the Indian market for imported vegetable oils particularly canola, but also soya bean oil, corn oil, palm oil, and peanut oil*. If so, it's been spectacularly successful. It's particularly the USA who have benefited or, to be more strictly accurate, certain vested interests in the USA. US taxpayers haven't benefited at all. Without subsidies from the taxpayer the whole trade would be uneconomic, and the loss to the US taxpayers is greater than the gain to the vested interests.
Argemone is a weed which is not native to India it originates in Mexico. Its seeds look very like the seeds of one of the main varieties of mustard grown in India, and since its introduction in India, it has occasionally been seen growing in ﬁelds of mustard. However, the plant is completely unlike the mustard plant, and is easily removed before harvesting, or even before seeds are set on either mustard or argemone. Furthermore, the normal method of harvesting mustard wouldn't harvest the argemone seeds anyway. It's inconceivable that accidental contamination could occur at anything more than an insigniﬁcant and harmless level. If it wasn't part of a conspiracy, then it was simply an attempt to make a bit more proﬁt, because argemone seeds have zero value, whereas mustard seeds cost money.
A chemical test to detect argemone oil contamination in mustard oil is quite simple (on an industrial scale not so easy at home), and sensitive to very low concentrations levels, well within safety limits.
Contamination with industrial oils can only be someone trying to make additional proﬁt or conspiracy, but adulteration of foodstuffs with cheaper lookalike materials is sadly not uncommon in India anyway, with occasionally disastrous results.
Probably the political coup of banning mustard oil took advantage of a chance cluster of serious contamination incidents, rather than the incidents themselves been part of a coordinated campaign but who knows? Long experience of the total unscrupulousness of powerful vested interests is bound to make one suspicious.
Erucic acid naturally forms about 40% of mustard oil. Whether it's toxic in humans is highly doubtful epidemiological studies have failed to show any correlation whatsoever with the health problems found in rats fed high levels of erucic acid in their food. Nonetheless, the Food Standards Agency in the UK, and other food regulation bodies around the world, have insisted that foods containing high levels of it must not be sold.
Food Standards Australia New Zealand published a technical report:
It's available online: http://www.foodstandards.gov.au/publications/Documents/Erucic acid monograph.doc.
It gives, in considerable detail and honestly as far as I can make out, the scientific basis of its advice. The honesty of its conclusion is more suspect, as I show below. It concludes that the safe level of erucic acid in vegetable oil for human consumption is around 2%. This is high enough to pass canola as fit for human consumption (funny, that), but too low to pass mustard oil.
To reach this conclusion, it first establishes that nursling piglets are, of all the animals tested, the most susceptible to erucic acid poisoning. It then takes the levels of erucic acid that are safe for nursling piglets, and divides by a hundred to establish a safe level for human consumption, allowing a safety factor†.
Would that such stringent tests were applied to foodstuffs and other things that one is liable to ingest or inhale produced in the US or Europe! And this for a foodstuff that has been consumed for millenia...
The section of the report entitled Effects in humans is particularly illuminating. It goes into considerable detail about deaths of humans in areas (France, Spain and India) where the consumption of rapeseed oil (also high in erucic acid) or mustard oil is traditional. They found NO evidence that erucic acid had any adverse effects whatsoever in humans, despite finding erucic acid in the bodies from areas where it's present in the diet.
"The presence of significant amounts of erucic acid in the myocardium could not be associated with any observed heart damage." (India: over 100 cases in Calcutta where there was a lot of mustard oil in the diet, 63 cases in areas where there wasn't)
"a significant association with alcohol consumption was found, but none could be established with dietary fat and vegetable oil consumption." (France: 269 cases)
"the oil was, in fact, a mixture of industrial rapeseed oil, soybean oil, olive oil, and animal fats that had been purposely denatured with 2% aniline and was never intended to be used as an edible oil" (Spain: hundreds of deaths from consumption of "rapeseed oil", May 1981 aniline really IS poisonous!)
That's the question of whether mustard oil is harmful or not: I'm absolutely certain that it's not. Whether there's an actual conspiracy behind the way it's been denigrated is impossible for me to tell.
Elsewhere on the same site mustard oil was described as edible, but the page has recently been removed. Happily it's still available from the Wayback machine: web.archive.org
Now for the question of its nutritional value.
As far as I can make out from a variety of sources, an oil for human consumption should ideally contain a high percentage of unsaturated fat, a good percentage of which should be ω-6 (omega-6) and ω-3. The ratio of ω-6 to ω-3 should be in the range 1:1 to 4:1.
Mustard oil fits this description better than any other vegetable oil, almost all of which have much higher ratios of ω-6 to ω-3, and most of which have lower percentages of unsaturated fat as well. Few other vegetable oils contain as much ω-3 as mustard oil soya bean oil is an exception, containing about the same amount of ω-3, but a much larger amount of ω-6, skewing the ratio badly (almost 10:1).
Fish oils typically have even lower ratios of ω-6 to ω-3 than mustard oil. Sometimes the ratio is even lower than 1:1. You can balance out vegetable oils with a high ratio by consuming comparable quantities of fish oil.
Of course you can obtain fish oil simply by eating the fish. You don't have to buy supplements. If you gut the fish yourself, learn to identify the liver and heart and don't throw them away!
In Britain I cheerfully buy mustard oil labelled Pure Mustard Oil, For External Use Only, and cook with it. I'm not dead yet (but I do look out for that "Pure"). It's exactly the same stuff hundreds of millions of Indians used for millenia before the ban, and are using again now the ban's been lifted in India although the market still hasn't recovered completely by any means. It's still hard to get mustard oil in some parts of India, and in some areas the farmers still can't ﬁnd a buyer for the mustard seed.
* Update: we now have the crazy situation where Indian businesses are destroying forests to establish oil palm plantations to replace imported palm oil, while poor local farmers are unable to sell the mustard seed grown on established small farms.
† If that doesn't seem to add up (how can a hundredth of the concentration still be 2%?) I can understand your confusion. But it does: the concentration of erucic acid in the animals’ food is only a fraction of the concentration in the oil, which only forms a fraction of the food.