Over 90 percent of coconut oil mills not fully functioning

By Shezna Shums

Over 90 percent of the registered coconut oil mills are not fully functioning because of the fear of lack of sales given that imported palm oil is now cheaper.

There are about 800 coconut oil mills registered with the Coconut Research Institute and most of them have ceased producing coconut oil for the last two to three weeks.

According to the Central Bank Annual Report for 2010 the government has taken measures to arrest the further escalation of the price of coconuts. The government reduced the tariff on import of edible oil to Rs.15 per kg in November 2010 in addition to raising the cess on exports of coconuts in raw form up to Rs.30 per nut from Rs.2 per nut. This was done to address the spiralling increase in the cost of coconut in the local market.

President, Coconut Growers’ Association Anton Nishanthe Fernando explained that imported palm oil is now sold in the market cheap as the import duty on same was reduced last year when coconut prices skyrocketed.

Today, imported palm oil continues to sell at a low rate thereby being too competitive for the local coconut oil millers. The import duty on palm oil continues to be in effect todate, although the price of fresh coconut is now reasonable.

However desiccated coconut producers are taking advantage of this situation and are buying up all the fresh coconuts for their industry recording staggering profits. Although the price of a coconut at the estate or the farm gate price is about Rs. 20 per nut, coconuts are sold in the market and shops at Rs. 30 per nut.

Coconut oil millers are not even buying the fresh coconuts at this low rate because the end product sees competitive prices with the other imported palm oils selling cheap in the market.

Sri Lanka coconut oil millers have their own coconut and copra estates while the others buy the coconuts and copra from outside.

“The main reason for the coconut oil millers not producing coconut oil, is because of the competitive prices of imported oils in the market, said Fernando.

“Majority of the coconut oil mills are not functioning 100 percent,” he stated, adding “With the prices in the market, the local producers cannot compete.”

Acting Director Coconut Research Institute Dr. J. Gunathilake said that a kilo of coconut oil at the farm gate is about Rs. 200, and quipped “With this situation the result is that the local coconut oil industry is not operating.”

He further stressed that the local coconut oil industry was facing a crisis at the moment. With the excess stocks of fresh coconuts it is mainly the middlemen who benefit and not the final customer. This is because the consumer has no access to coconuts at a lower price although coconuts are available in plenty.

It was also highlighted that the export of fresh coconut is seeing an import tax of Rs. 30 per nut thus hindering the fresh coconut export market in Sri Lanka. It was noted that if this import tax was relaxed a bigger volume of fresh coconuts could be exported.

According to the Coconut Research Institute there are about 800 registered coconut oil millers with over 1500 smaller cottage industries involved in coconut oil manufacturing.

The coconut oil millers stopping their production of coconut oil will affect the long term locally manufactured coconut oil industry in the country.

These two measures were taken to address the decline in coconut productivity which was a result of decline in productivity resulting from degradation of top soil of many estates and smallholders’ lands, less fertiliser usage, and the edible oil market

The government took a decision to expand the fertiliser support scheme to the coconut sector irrespective of the extent, to enhance coconut production.

The decline in coconut production was substantial especially in the last quarter of 2010 where the production declined by 32 per cent to 429 million nuts as against the corresponding quarter of 2009.

The use of fertiliser for coconut has also shown a decline in the recent years especially among the smallholder sector, which represents around 80 per cent of the total extent of coconut in the country.

However the government has decided to expand the fertiliser support scheme to the coconut sector irrespective of the extent of the coconut land to boost coconut production.