Coconut plays a pivotal role in the economy of Sri Lanka. Its role as a major protein and fat supplement in the diet of an average Sri Lankan could not be quantified easily. It also contributes significantly towards foreign exchange earnings and in 2007 earnings from coconut based products amounted to Rs. 24 billion.

About 30 major coconut products turned out from coconut fruit and other parts of the palm have been exported to about 125 countries around the world. However the escalation of coconut prices to unprecedented levels within a short period has created a lot of concern among consumers and coconut based industrialists. The price of a nut in the retail market has seen a 76% increase from Rs.17 per nut in December 2006 to Rs. 30 per nut in June 2008. Coconut oil is sold at Rs.180 per bottle in June 2008 against Rs. 80 per bottle in December 2006. Despite a drastic price increase on the other side a severe shortfall of nut supply has almost brought the number of coconut-based industries to a standstill during the first quarter of 2008.

Therefore coconut prices and the coconut industry have been a crucial topic of discussion amongst the public and most of the media in recent times. The CDA was blamed for this situation and told to come up with an instant remedy. Although the mandate of the CDA is mostly confined to the coconut industry, the authority is forced to act promptly to ensure availability of sufficient quantity of coconuts at a reasonable price to the existence and sustainability of the industry.

Reasons for high prices
The price of coconut is mostly determined by the annual coconut production. The average annual production of coconut more or less hovers at around 2700 million to 2800 million nuts without any progress over the last one decade. As such the productivity of land also is almost stagnant at 3000 nuts per annum per acre. At the same time on average, 75% nut production is consumed locally and local consumption is on the increase over the years due to population growth. The price of coconut in Sri Lanka remains much higher than other competing countries -- Indonesia Rs 13, India Rs. 19 and the Philippines Rs. 14 while in Sri Lanka it’s easily over Rs 25. The removal of VAT on coconut oil production has also activated the coconut oil industry from 20,000 metric tonnes in 2005 to about 84,000 MT in 2007. As a result all the coconut based industries compete for procurement of limited availability of coconuts.
Domestic consumption of coconut oil and vegetable oils has been estimated at about 160, 000 MT per annum. But the national production of coconut oil amounted to around 84,000 MT in 2007, leaving a deficit of about 75,000.

This is being met by other types of imported substitutes like vegetable oils specially palm oil. Local market prices of coconut and coconut oil are influenced or directly determined by landing cost of imported coconut oil and other vegetable oils. However in the world market petroleum crude oil prices have skyrocketed by about 130 % from $62 per barrel to $142 within a period of 15 months from December 2006 to June 2008. As a result most of the countries have started to use vegetable oil for the production of substitute fuel bio diesel and even some countries have gone to the extend to enforce regulations to use a certain percentage of bio fuel blend as a mandatory requirement. This global development has had a direct impact on world vegetable oil prices and invariably on our coconut oil and coconut prices on a greater extent.

At the same time before the early 80s, Sri Lanka had achieved self sufficiency in coconut production. Total requirement of cooking oil was met by locally produced coconut oil and despite this Sri Lanka exported a large quantity of desiccated coconut, coconut oil and other coconut products. However with the population growth and the increased use of vegetable oils with the improvement in economic growth, local consumption of vegetable oil increased substantially and this pushed the demand for vegetable oils. Meanwhile fragmentation of coconut lands, pest and disease menace, low out-turn of new varieties of coconuts (reduction in weight of kernel per nut), poor management practices etc. caused negative impact on net availability of coconuts. Therefore if Sri Lanka needs to achieve the self sufficient situation again, the present total nut requirement will be about 4000 million nuts.

However this target is far away from the present actual production situation of less than 3000 million nuts. However even if we want to ensure the coconut industry operates at a sustainable level without much burden to the local consumers at least we should be able to achieve 3500 million nuts per year in the short run.

Therefore we are compelled to formulate some effective short term, medium term and long term measures to safeguard the industry and consumer's interest. As such we have mooted a new concept known as wastage minimization in coconut usage. Sri Lanka is the highest per capita consumer of coconut in the world amounting to about 95 nuts per annum in the form of fresh nut alone. Thus the total consumption of coconut in Sri Lanka per annum amounted to almost 2451 million or 85% of the total production of 2869 million nuts in 2007 in the form of fresh nut and coconut oil. However at the same time according to a study by CDA about 35% of coconut used for culinary purposes at the house hold level is wasted equal to 536 million (nuts) per year due to inefficient extraction methods and it goes to the waste bin along with the residue. In addition a large quantity of fibre, coconut shell, coconut water, etc are wasted due to the present usage practice. The total value of wastage in the form of coconut kernel, coir fibre, coconut shell, coconut water, paring oil is estimated at about 25 billion rupees per annum. Other than the above, transport, loading, unloading, storage etc. costs much time and money.

By popularising and promoting value added, easy to use products like coconut milk, coconut milk powder , coconut cream, coconut paste, desiccated coconut, etc in the local market on a gradual scale over a period of 5 to 10 years it can save a substantial quantity of coconuts of up to 200 million to 300 million nuts per annum. By saving this quantity of nuts from the household usage, the surplus of the nuts for the coconut industry could be enhanced. In addition as coconuts are supplied to a focal manufacturing point it is easy to collect coconut shell, coconut water, coir fibre, etc for the by products industry. Unlike coconuts it is convenient to carry coconut milk powder, coconut milk and coconut cream by the consumers. Coconut milk powder and coconut milk are presently marketed by the Nestle and Renuka groups, Tech Foods, etc. in the local market. Active involvement of CDA in this exercise will strengthen the market for these products and a certain degree of recognition among the consumers would be created for these products. Initially about 30,000 promo materials by the CDA are to be displayed through private company outlets throughout the island depicting the wastage minimizing campaign on the use of coconut products. Gradually the CDA expects to get more private parties involved in this endeavour.

At the beginning of this project the CDA expects to target the upper middle class urban working segment of the population and after a few years of activity the promotion campaign is to cover the suburbs and other parts of the island. This campaign also carries another message -- promotion of usage of pure unadulterated coconut oil and its health benefits. The coconut oil presently found in the market place is mostly adulterated with palm oil and consumption of it will result in harmful health effects. Therefore the CDA has taken measures to spot check the quality of the coconut oil sold at retail outlets in the country with the association of the Ministry of Health and if adulteration is proved, legal action would be taken against the offenders who sell adulterated oil under the coconut oil label.