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Already under pressure due to shortage of oilseed extraction or oilmeal for export, Indian suppliers are further worried due to the detection of a banned chemical, malachite green, in rapeseed meal consignments to China. This has serious implications for oilmeal export at a time when the demand for restrictions on outflow is growing shriller.
Following the detection of the banned chemical, the Chinese government may not allow discharge of rapeseed meal exported after mid-September if any contamination is detected, says Mr Sushil Goenka, President of Solvent Extractors' Association.
The authority concerned in China has reportedly asked for implementation of quality control systems such as HACCP (hazard analysis and critical control point) in Indian oil mills and solvent extraction plants. Although this should be seen as a welcome imposition, there is a view that improving the supply chain management (SCM) in India is a herculean task.
In reality, it need not be. Admittedly, the solvent extraction industry is a highly fragmented one. There are as many as 800 plants dotting the length and breadth of the country. But many of them are closed; and for most others, capacity utilisation is rather low. Unfortunately, the country's oilseed output shows wide year-on-year fluctuations and output growth has been rather tardy.
Demand for animal feed
On the other hand, domestic demand for oilmeal, mainly as animal feed, has been expanding robustly. Healthy growth rates registered by the dairy, livestock and poultry industries mean growing demand for animal feed. One can expect special provisions in the 12th Plan, beginning April 2012, to sustain healthy growth in the dairy, livestock and poultry sector.
Rising demand and sluggish output growth would inevitably result in shortage over the next 3-4 years, leaving no surplus for export.
Although there would be burgeoning domestic demand for animal feed, the oilseed processing industry must learn to generate its own raw material, manage supply chain efficiently and ensure quality supplies if it seeks to continue overseas supplies.
Time for action
It is a great opportunity for an industry association such as the SEA to rise to the challenge. It can institute research to help processing units improve their SCM. The Agriculture and Commerce ministries must support such an initiative. Eventually, only units that adhere to SCM guidelines may be allowed to export.
The domestic oilseed processing industry must realise that the present quality issue is an opportunity for it to upgrade operational efficiency and improve quality control to ensure long-term competitiveness.
It is an opportunity to establish backward linkages and grow raw material under self-supervision.
Technically, selling oilmeal on condition ‘shipped weight and quality final at the load port' may help obviate quality complaints on arrival at destination; but that would be just short-term.
On their part, overseas buyers may insist that quality should be final at the discharge port.
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