Coconut Industry in the 12th PLAN

I had written a blog on CDB plea to provide an outlay of Rs 2,400 Cr to the Coconut industry in the 12th Five Year Plan. I am an ardent supporter of Kerala and I had a thumb in bringing National Institute of Fashion Technology to set up a facility in Kerala, and many towns were declared as “Town of Export Excellence” due to representation of mine before the concerned at Delhi. I was largely responsible for creating a no of Textile Clusters and providing consultancy to the Government and entrepreneurs to set shop here. Coir and coconut industries have been able to get lot of central patronage, and became eligible for Schemes of the FTP. Therefore, when I received a number of calls I thought I should explain. CDB received Rs 395 Cr in the XI Five Year Plan, 200% improvement on its outlay of Rs 145 Cr in the X Five Year Plan. The component of existing Schemes (Rs 150 Cr) and new Scheme namely Replantation and Rejuvenation of the Coconut industry (Rs 250 Cr) , 200% over and above the existing Plan outlay of X Plan was sanctioned due to the fact that the Plantation industry and the Kerala’s principal crops all got Special outlay sanctioned- Spices, Rubber, Cashew, Coir, Coconut, Tea, Coffee, marine/fisheries due to special initiatives of Hon’ble Shri Jairam Ramesh, who had extensively argued the same before the Hon’ble Prime Minister. The economy was also in full bloom, liquidity was plenty, and so making additional allocation was not a problem. If one were to look at the allocation made for different sectors, they would see that only a feeble percentage of increment was sanctioned as additional allotment, Plan after Plan at quin quinneal interval. Presently, the economic condition in India is rather weak. Global markets are fragile. India’s fiscal deficit is far beyond the target. The GDP growth is expected to crumble to 6.9 %( target 9%). Though food, general inflation has been tamed, it may bout at any juncture. Hence caution is the economic policy of expedience. The XI Five Year Plan Schemes, if they are to be continued, then evaluation status would need to be filed. Here quantitative analysis of cost: benefit analysis would have to be progressive. However, the new major Coconut scheme was a pilot Scheme, and it was just introduced and it would take gestation before the results bear fruit. Secondly, the conversion of logs to Particle boards, setting up of a manufacturing facility is yet to materialize. A huge growth is visualized in this stream. Coconut industry’s dominance is on Coconut Oil and Copra. It is highly saturated. High dominance is given to this segment in the Coconut sector. The Government in order to protect the farmers announces a Minimum Support Price for Coconut as well as Copra. The MSP of milling Copra was fixed at Rs 5,100 per quintal and Rs 5,350 per qtl for ball copra. De-husked Coconut has a MSP of Rs 1,400 a quintal. Presently, the market price is less than that of the MSP (Rs 4,500 -Copra). It is further expected to decline. The demand is expected to be in the region of 10.5 lakh tones (for Copra). The price of Coconut Oil (Copra) is Rs 6,700 per quintal. The total manufactured quantity of Coconut Copra oil is 4.5 lakh tones, which is equivalent to 1% of India’s total demand of edible oil in India. Rightly recognizing the trends, the Board has decided to focus on other sub sectors of the Coconut segment along with enough weightage of Coconut, Copra, and Coconut Oil. One major step envisaged by them is to increase the productivity in coconut nuts production. Presently it is 8303 nuts per hectre meaning 48 per palm. If productivity is increased to produce 100 nuts per tree, 17,500 nuts will be available from 1 hectre land used by palms. This would definitely scale down the costs of products. There are two issues here. The number of palms per hectre should also be simultaneously increased along with increase in nut growth per tree to maximize output. Law of diminishing Returns, non availability of labour has already strained the sector. Then the supply chain. It is not direct farmer-market linkage, but farmer-middleman-market linkage. The (middle man) buys Coconut at cheap prices, and waits for the price upheaval to dispose off his stocks. This is one of the manifest reasons Coconut prices are mid-dip. With the proportional growth of livestock and animals, the oil meal which is a by-product of Crushing of Copra which gets 65% oil, 28% oil meal, 6-7% moisture, is having an uppish demand. Recently, Tata Global beverages signed a MoU with PepsiCo (India) to distribute their Himalayan water and Tata Glucose Plus thro’ the distribution arm of PepsiCo. The Pepsi holding Company is distributing tender Coconut water in America in 330 ml and 500 ml packs. If this JV takes interest, then tender coconut water can be produced and marketed by this MNC in India. The Unique selling Preposition can be “Sports drink from Coconut water”. The one missing link in the Coconut industry is the new entrepreneur setting shop to produce value added products. The CDB should address entrepreneurs and draw them to the Coconut industry. Other countries have an upper hand in this sphere. Coconut shell has amazing properties. Its fibre is natural filler. Coconut filler can be used in broad range of applications to overcome the poor crack resistance of epoxy resin polymer used in aerospace, bridges, automobiles, sale boats. Epoxy is a copolymer polyepoxide thermosetting polymer formed from reaction of an epoxies resin with polyamine hardener. It gets tensile and flavoured property by using coconut shell filler particles. It is estimated that the world would require 3.03 million tones against present production of 1.46 billion tones. Its present value is around $ 150 billion. 3 M, Aditya Birla (India), Sumitomo (Japan), UPPC GmbH (Germany), and Companies in China are producing Epoxy Polymer. This would open up new opportunities for Coconut shell sellers. Handicraft is another area where the Board has given a feeble attention. It can contribute huge business opportunities to the handicraft manufacturers. By way of conclusion, what I had stated in my earlier blog was just drawing the attention of the authorities to the huge outlay proposed which may not augur well in the current situation. Any new proposal need to be vetted by a Group of Ministries, Planning Commission after being recommended by the administrative Ministry. While the proposal to trim the allocation of the XII Plan is in the air, with the economy downcast with low growth, hopeful assessment of expectations is very low. Hence focus on holistic growth with a higher outlay may not find favour at the present juncture with the Govt of India. That was the point I was trying to make. The very low turnout of Coconut’s value in the GDP of the Country is a negative factor which will weigh against the Industry.

Indian Economy heading where, no where?

The Wholesale Price Index and Consumer Price Index which had wide variation, is now looking for a merger. Both of them are into double digits, and the percentage will go tandem with one another. This is an achievement of the Government’s economic and fiscal policies which are headed by Oxford educated Prime Minister, who is a Scholar in modern, ancient, medieval Economics.

Government looks to outside world to stabilize Indian economy. No problem with that. Government wants to bring Foreign Direct Investment in the multi-brand Retail sector, which would bring in invaluable Foreign Exchange, investment, expertise, and increase expenditure of hi-fliers by buying items from these fabulously decorated shops, malls, with good ambience, etc. And, of course, the farmer will get remunerative price for their product. With these noble objectives, why should any body murmur?

Our Government’s policy of import of Crude and edible oil which is in excess of 30% of the total required demand at nil customs duty creates a direct loss of Rs 24,000 Cr. Import/Export of other oils other than Palm oil causes the domestic industry to suffer sustained losses. Three lakh tones of imported palm oil is distributed to Public distribution System beneficiaries with a subsidy of Rs 15/- per Kilo. The total incidence of this benevolence on the exchequer is Rs 450 Cr.

Recently Government hiked the rate of kerosene. 39% of PDS Kerosene is diverted, and 18% of this finds way to adulterate diesel. Mr. B K Chaturvedi Committee found out that the rural use of kerosene has fallen to 40% from 51%. It predicted that only 1% of the PDS Kerosene was used for cooking purposes. The Committee noted a strange phenomenon- 24% rural consumption goes to states where there is 100% electrification Food Security programme is expected to obliterate poverty, as the beneficiaries would get atleast one square meal a day. 100 days compulsory with work at minimum wages is expected to provide stable income to the unemployed. Government should differentiate between unemployment and voluntary unemployment. In India, there are more than 20% of people who have the necessary physical strength and ability and below 40, who abstain from work and prefer to be voluntarily unemployed.

With all these developmental and populist Schemes directed at the poor, downtrodden, the weak, the incidence of percentage of poverty should have come down. But in India, opposite always happens. Every year, after substantial spending of money to the poorer sections of the Society, which no body grudges, the BPL population is going up in geographical progression. The Statistics provided by NCAER, Planning Commission, and the States, there is a wide divergence on the no. of BPLs. There is a mismatch in the figures. What about the audit; is it done only for namesake?

Government announces a Scheme. Course correction midway, Scheme contours are altered. A well intended Scheme conceived for some purpose, if the boundaries are altered the Scheme finds alterations. Then, the intended benefits will not accrue. I am referring to the removal of IT benefit for new SEZ units, new units not yet invested, units not at started commercial production, and many benefits offered to SEZ developers have been withdrawn. Various SEZ are in various state of completion and the units are also about to commence production. All of them will lose the provisions promised. Lack of clarity on the continuation of Minimum rate of Tax to developers and units in SEZ, has stalled work in the various sanctioned SEZ being developed by private promoters.

Now, coming to the retail prices of vegetables which had runaway inflation is still in the danger zone. There is no scarcity in the local production of vegetables in Kerala, as Onam festival is just around the corner, yet the prices have moved up significantly. Tomato prices have doubled over a year(selling at Rs 30/- per Kg against Rs 18/- a year ago), bitter gourd (Rs 34/kg against Rs 26/kg last January), cowpea (Rs 16/kg against Rs 26/kg last year), pumpkin (Rs 15/kg), elephant foot yam (Rs 32/kg), ginger(Rs65/kg),cabbage(Rs 20/kg), carrot(40/kg against Rs 16/kg in January 2010), Drumstick (Rs 20/kg against Rs 100/kg in Jan 2010). In the last year, the price of drumstick was Rs 30/kg (July 2009). Greenchilli is selling at Rs 42/kg against Rs 20/kg in January 2010.

Industrial output in April 2010 grew by 17.6% over what it was a year ago, aided by the boynant recovery in exports. WPI is 10.2%, while food inflation has slightly come down. The Government received Rs 70,000 Cr (Spectrum auctions), advance tax payments (Rs 35,000 Cr). RBI has hiked the two short-term policy interest rates. The impact of RBI’s interest rate signals and the efficacy of monetary transmission needs close monitoring. The banks have adopted a new Base lending rate system. How far it will impact, time alone can tell.

Finance Minister wants to rein in fiscal deficit. All the acts done by the Finance Ministry is guided by defeating Savings growth rate by which inflation will come down. But is he aware of the Nils Gilman’s Deviant globalization theory? 50% of Indian economy is in the hands of people whose wealth is derived from illegal actions which have grown at twice the rate of legal economy. Perils and Opportunism involved in illicit dealings in the financial, real estate, energy, high corruption, stocks and shares, organs, CD disks, piracy, gold, cricket betting, etc. More diverse pattern of purchasing put transactions into buckets which cannot be measured. These funds would invade controlled economy, sending the carefully rehearsed formulas to oblivion. In India, deviant globalization has been active and sends economic cycles off the wheel. Has FM got any stick to beat this with?