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Edible oil packaging cost prohibitive: Traders

Ch. Prashanth Reddy

HYDERABAD, Nov. 9

THE Andhra Pradesh Government has recently banned the sale of edible oils in loose form in the State.

The Government said the ban was imposed in the general interest of public. Its contention was that the step would arrest adulteration of the cooking medium.

However, edible oil dealers said the packaging cost would be prohibitive for the poor consumers. With the purchasing capacity of the weaker sections of the society being limited, they would purchase only two to three-days requirement of oil at a time. Mo st of them prefer to purchase 50 gm of oil along with foodgrains, pulses, etc. Hence, the edible oils will also have to be packed in 50 gm, 100 gm, 200 gm apart from 500 gm and 1,000 gm.

As per the calculations of the Twin Cities Edible Oils Dealers' Association (TCEODA), the cost of packaging of a 50-gm edible oil will be Rs 1.50, while its market price in loose form, at the prevailing rates, is Rs 2.50. Similarly, the packaging cost of 100 gm of oil is estimated at Rs 1.75, while it is being sold in loose form for Rs 5. The packaging cost of 200 gm oil is estimated at Rs 2 and that of 500 gm at Rs 2.50.

This indicates that packing in smaller numbers will be too costly for the consumer since the packaging cost alone will be more than 50 per cent of the total cost. The packaging cost will, however, come down with the increase in quantity. Currently, 80 pe r cent of the edible oils is sold in loose form. According to TCEODA President, Mr Tulsiram Gupta, the total cost of installing a packaging machine works out to be Rs 6.15 lakh. In addition, an amount of Rs 1-2 lakh has to be spent on the civil construc tion of premises where the machines have to be located. All this cost has to be incurred by the wholesale traders whose entire working capital may be around Rs 10 lakh.

Currently, edible oils distribution is done in four stages. The millers sell the oil to wholesalers by tankers, barrels or tins. The wholesaler, in turn, will sell the oil partly in bulk and partly in containers to the semi wholesalers and retailers. In this process, the wholesalers will have to undertake the responsibility of packing the oil after due testing .

The consumption of edible oils in the twin cities of Hyderabad and Secunderabad and the adjoining districts is estimated to be 100 tankers or 10 lakh kg per day. TCEODA estimates state that at least 200 packing machines are required for packing this oil in 1-kg sachets. If it has to be packed in small quantities of less than 1 kg, more than 600 machines will be required.

Mr Gupta told Business Line that the wholesalers in the State were not in a position to supply edible oils in small packets. As a result, retailers and consumers, particularly in small villages and towns, would be feeling the pinch.