The Hindu Business Line : Coconut oil sector on revival path

After the ban on futures trading in coconut oil in 1971, the oil milling industry in Kerala was struggling hard for survival with cut-throat competition among the companies and under-utilisation of capacity, which led to the closure of many small units.

Even some large units which survived had incurred heavy losses, said Mr N. Ananthan, Chief Executive, First Commodities Exchange of India Ltd (FCEI).

"This was because of lack of risk management due to non-availability of hedging mechanism in those years.''

According to him, the industry has been showing signs of revival after the revival of futures trading in coconut oil from last October. Also, since the resuming of futures trading in copra from last June, the millers are now able to buy copra and sell coconut oil in advance without any hassles and plan their business with proper risk management, which could be seen from the price movement of coconut oil ever since.

The prevailing price of coconut oil now is Rs 4,600-4,800 per quintal, compared to last year's price of Rs 3,000-3,200 during the same period.

The farmers are getting a fair price for coconut at Rs 4.50-5 per nut compared to Rs 2.50-3 last year.

They are also able to plan well in advance when to sell their produce and at what rate by watching the futures price of coconut oil and copra. "Thus, it is now immaterial whether Nafed procures or not; the prices shall depend purely on demand and supply.''

In order to increase the volume of trade in copra and to attract more members, FCEI has decided to reduce the margin deposit payable by members from Rs 4,000 to Rs 2,000 per quintal and the daily fluctuation limit from Rs 100 to Rs 50 per quintal.

Besides, delivery shall be made from anywhere in the State, provided the seller compensates the buyer for the extra freight expenses incurred by delivery made from places beyond Kozhikode district in the North and Thiruvananthapuram district in the South.

Certain parameters have also been fixed for copra to be delivered such as moisture content, maximum of six per cent on random check and rubbery, and not more than 10 per cent of chips and fungus together, he added.

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