SUN FLOWER OIL INDUSTRY IN TAMIL NADU

Ujjagar Singh, Managing Director, Tamil Nadu Agro Industries Development Corporation (TNAIDC) speaks on the Sunflower Oil industry today.

Popularising the use of Sunflower Oil

The biggest strength of this industry is the presence of this corporation (TNAIDC) here.  I should mention here that when no one in the country was talking about the use of sunflower oil for health purposes, our corporation went ahead with this and communicated a strong message to the masses on the usefulness of sunflower oil and its health benefits.  Today, many other major plants have come up in other states and there even some multinationals with very large capacities.  I must admit that we have no intention of competing with them, as we don’t feel it necessary at all.  In fact our objective to popularise the use of sunflower oil as a cooking medium has been achieved, as is shown by the number of plants being set up with very large capacities elsewhere by the private enterprise, MNC’s as well as co-operative sector (like the ‘Dhara’ brand).  Our plant continues to crush the sunflower seed, which we buy primarily from the farmers in Tamil Nadu and if necessary from the nearby states of Andhra Pradesh, Karnataka, Kerala and even Orissa.  One or two years, when there was a failure of the sunflower crop in the southern states, sunflower seed was purchased by our corporation from the northern states of Punjab, Haryana, Bihar and Rajasthan.

TNAIDC - Commitment to the Consumer

Our plant has been functioning quite well, our staff are dedicated and we are maintaining very high quality and purity of the product.  As a very responsible government organisation, we feel that it is our duty; one is that we have to provide a high quality product for the masses, so that others in the private sector have to match our quality, thus ultimately benefiting the consumer.  Secondly, because of management problems, lockouts, strike and low prices, sometimes private companies disappear from the scene.  At such times our corporation is prepared to step in and provide this cooking medium and handle any such crisis.  We always maintain a ready stock of 200 metric tonnes at any point of time. Thirdly, the most important point is that we keep the prices very reasonable. Sometimes we sell at a very small marginal profit of a few paise; as low as 10 paise.  Many a time we sell at a loss also in case the market condition is such. We protect the interests of the consumer from the price angle as well. 

The sunflower oil plant has got an excellent quality-testing laboratory, fully equipped to test the quality of each batch and we are strict in rejecting the entire batch even at the slightest doubt.  The factory also has a well-equipped packaging division, where packaging is done in a scientific and hygienic manner so that the oil does not become rancid when it reaches the retail market. 

The Price Mechanism

I would like to mention here that we are meeting about 66 – 67% of our demand from local production.  The remaining edible oil has to be imported. About 45 lakh tonnes were imported last year, up from the previous year’s import of 43.7 lakh tonnes.  This has been keeping a good price line and availability of edible oil. But  in the last two years units have been struggling to maintain a profit line thanks to very low import tariffs announced by the Government of India on imports from Malaysia, Indonesia and Argentina.  To that extent all the units in the edible oil field in the country have been suffering.  They have been operating at very low capacities, i.e., 25 – 30%. Many have closed down or switched over to some other operation.  Others are running at a loss, waiting for better times.  Recently, due to the efforts made by the State Government, they have raised the import duties on all edible oils and have rationalised it by and large very fairly.  The idea is not only to increase import duty per se, but also harmonise the interests of the consumers and growers, farmers and processors.  The negative effect has been that the farmers are not getting adequate returns for their produce as the processors find it much more profitable to import crude edible oil from abroad, refine and resell in the market.  Some of them unscrupulously sold off the same oil without refining, by just repacking much to the disadvantage of the consumer. 

The farmers want to switch over to some other crop because of the unprofitable prices that their produce commands.  The Minimum Support Price (MSP) for sunflower seeds, for example, is Rs.11.40/-, but the sale of seed is going on for Rs. 9.50/- or RS 10/- in many states.  We have ensured in Tamil Nadu that the seed is purchased at least at the MSP rate or higher than that.  The interest of the farmer also has to be taken into account by the corporation.  This puts us at a slight loss, because when we procure seed at a slightly higher price and then process, refine, package it and sell, our profit comes down and at times we even suffer loss.  But we bear this loss with a sense of responsibility.  The import duty increase on Palmolein and some other oils for example, has been a very good move.  Now those sectors have been now well protected and have no complaint whatsoever against the government agencies.  As far as sunflower seed is concerned, the previous duty on crude sunflower oil was 27.5%. Actually the duty was 25%, with a 10% surcharge on that, so it came to 27.5%.  It has been hiked to 35% only with the surcharge abolished.  This means that the effective hike is only 7.5% only.  In my opinion, unless the import duty on crude sunflower oil is fixed around 60 – 70%, the processing industry will suffer heavily.  Our own plant for example, is running at a low capacity between 37 and 45 % for the last two years because of the disadvantages of the price mechanism.  However we keep the expellers running one by one and wait for better times.