The Hindu Business Line : VAT confusion strikes coconut oil prices

The rates under VAT for coconut oil has not been specified by the authorities and hence, "we do not know what would be the rate applicable to this commodity," Mr Amar Bahadur Singh, President, Cochin Oil Merchants Association, told Business Line on Tuesday. In fact, this confusion has brought trading almost to a standstill, which in turn, has pushed prices down.

Another reason pointed out by the trade was the availability of palmolein in the market at low prices, he said. Ever since online trading began from November 3 last, trading was going on smoothly but from April 5, the market started experiencing the slump, he said.

The association, he said, would be seeking a clarification from the Government on the rates applicable to coconut oil.

Coconut oil prices, which were ruling above Rs 6,500 a quintal till March 11 dropped to 6,060 a quintal on March 18 and the decline continued and reached Rs 5,795 a quintal on April 11, he said.

Copra prices have also dropped to Rs 3,925 from Rs 4,600 a quintal. According to Mr Singh, there has been good demand from up country markets till mid-March.

"Once the confusion over the VAT rates is cleared, demand would pick up," he said.

Sharp fall in coconut production had pushed the prices of copra and coconut oil in the country last year, he added.

Drought in Tamil Nadu and Karnataka in recent years has brought down coconut production, while diseases such as mite attack and root-wilt has reduced production in Kerala. Thus, shortage in coconut/copra in the neighbouring States has forced milling and desiccated coconut sectors to import coconut from Kerala, leading to short supply of copra to milling units in the State. Milling units in Kangeyam in Tamil Nadu and desiccated coconut units in Karnataka have been buying large quantities of coconut from Kerala mainly from the Malabar region.

Consequently, the commercial availability of copra has dropped, industry sources said. According to them, as coconut prices had been at rockbottom for about a decade till it started picking up in 2001-02, growers had neglected the coconut palms, which had, in turn, negatively affected productivity. Kerala used to produce around 3.5 lakh tonne of oil and over 5 lakh tonne of copra a year. Production must have dropped by around 30 per cent, he said.

The demand was so great that prices shot up to an all-time high of over Rs 7,000 a quintal last year.

The toiletry sector, especially soap manufacturers, use coconut oil to the extent of around 23 per cent of its total oil requirement until recent years. Ever since prices started shooting up, its offtake has dropped to around 5 per cent.

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