Domestic mentha oil industry in crisis due to jump in synthetic mentha imports

The domestic natural mint oil industry with total production of 39,000 tonnes (2022-23) and a market size of approximately ₹6,000 crore is facing serious challenges due to unbridled import of synthetic mint oil into the country over the past 4-5 years.

Indian imports of synthetic mentha oil has jumped 5-fold from 1,700 metric tonnes (MT) in 2017-18 to around 9,500 MT in 2023-24 (estimated). Imports during the 2022-23 fiscal were around 5,800 MT. Due to lower prices of imported synthetic mentha than domestically produced natural mint oil, the total volume of imports has increased to about 25 per cent of domestic market size.

Mint oil is obtained mostly from “Mentha arvensis” herb which has put India on the world map as the finished products (menthol flakes/crystal) are primarily exported. Currently about 60 per cent of total production in India is exported and the remaining is mostly consumed in the domestic market by industrial buyers from FMCG, pharma and tobacco industry.

UP major grower

In India, mentha is cultivated in nearly 252,000 hectares with an average mint oil recovery of 132 kg/hectare (2023-24). Uttar Pradesh (UP), Madhya Pradesh (MP) and Bihar are the major producing States growing mentha, with UP accounting for more than 90 per cent share.

Currently around 6-7 lakh farmers, mostly small and marginal, are engaged in mentha cultivation across India. In the producing regions, around 9,000-10,000 primary distillation units operate, engaging 50,000-60,000 farm workers, who do the steam distillation of mentha herbage brought by farmers to produce crude mentha oil. This oil is further sent for secondary processing to produce menthol flakes, crystal, DMO, etc.

In India, at present, around 120-140 secondary processing units (menthol plants) are operating, out of which, more than 90 per cent are located in UP, mostly in the key production districts of Sambhal, Badaun, Chandausi, Barabanki, Rampur, Bareilly, Sitapur and Moradabad.

Factors impacting sector

During our primary survey with farmers, processors and other stakeholders in key mentha producing districts of UP and Bihar, we understand that currently mentha oil industry is affected by various factors viz. rising imports, fall in planted area and production, non-lucrative mint oil prices and shifting preference of industrial buyers towards synthetic menthol. In the last 2-3 years, the changing dynamics has directly and indirectly affected the whole value chain of the mint oil Industry along with the livelihoods of the stakeholders involved.

Due to rising influx of imported synthetic mentha oil, local natural mint processing plants are forced to operate under 40% capacity utilization as large numbers of industrial buyers from FMCG and Pharma sectors are directly importing synthetic mentha oil rather than buying from local processors. At current duty of 12 per cent, imported menthol is around 20-25 per cent cheaper than domestically produced natural menthol.

Besides the above, a huge distress is visible at growers’ level, as non-lucrative farm gate prices (₹950-1100/kg) in the last 3-4 years and rise in cost of cultivation, has led several farmers to shift to other crops. The returns in mentha cultivation are currently around ₹12,000/acre whereas other prominent crops like maize provide ₹25,000-35,000 per acre, as per our survey.

30% drop in area

In the last four years, the total acreage under mentha cultivation has dropped almost 30 per cent to 252,000 hectares in 2023-24 from 355,000 hectares in 2019-20. Accordingly, in the current year 2023-24, domestic production of mint oil is estimated at 33,000 tonnes, down 15 per cent from the previous year.

We also observed during our field survey that due to falling acreage and corresponding lesser availability of mentha grass for distillation, around 30 per cent distillation units were shut down (~4,000 nos) across major mentha growing belts of UP and Bihar. On similar lines, due to relatively less availability crude mint Oil, processing plants are finding it tough to operate and remain viable.

Out of 13,000-14,000 distillation units that operated 3 years ago, only 9,000-10,000 units are currently operational, and the trend seems only to worsen.

The fear of the industry is that as few MNCs are setting synthetic menthol prices always lower than natural mentha oil prices, domestic buyers from FMCG, pharma, tobacco, and confectionery sectors are importing synthetic mentha oil at cheaper prices. This is very worrying factor for the domestic processing industry.

Segregate HSN codes

In view of the above observations, there is an urgent need to review the current import policy of menthol products. The mint industry, along with farmers, are sending representation to government for policy interventions, specifically for introduction of a higher duty compared to the current 12 per cent duty, to dissuade its imports and encourage domestic natural menthol production. There is a need to curb import volumes by means of either an increase in import duty or fixing minimum import duty rate (say, at $25/kg).

It is also necessary to segregate the HSN codes for synthetic and natural products imports, without which users are unable to differentiate one from the other. It is further suggested that as a driver for natural mint industry to survive, Government could make it mandatory for all domestic industrial buyers to disclose and label their products as using natural or synthetic menthol, and also mandate using at-least a minimum percentage of natural mint in their products.

Moreover, in public interest, a toxicology study should be initiated to assess the impact of usage of synthetic menthol on health, as the public is unaware of the long-term consequences of human consumption of synthetic menthol.

The author is CMD, TransGraph Consulting 

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