Financial Times

Coconut growers warn against DC cartel
By Quintus Perera
Coconut planters have warned that the gradual closure of coconut oil mills could reduce competition for their nuts and lead to the creation of a cartel by desiccated coconut (DC) millers.

The Coconut Growers Association (CGA) said in a statement that for the industry to survive it is not only necessary to encourage agricultural inputs and increase production of coconut but also ensure favourable market conditions for the sale of the produce. "The price obtainable can only be enhanced through a competitive process and with the gradual demise of the coconut oil industry, the producer is exposed to the threat of a monopoly situation, which could eventually result in the establishment of a cartel by DC millers."

Coconut Growers Association chairman J. V. R. Dias said that a healthy coconut industry is the obvious counter to such a threat and its resuscitation is in the interest of coconut growers.

The CGA, with 900 members, functions as a watchdog to further the interest of coconut growers to sell their produce at a reasonable price. It called for a study to identify niche markets for top quality coconut oil and for the promotion of coconut cream and milk powder among housewives to reduce domestic consumption of fresh nuts during lean cropping months.

There is a shortfall in the crop during December, January and February resulting in soaring prices of fresh nuts. Current annual production is around 2,500 - 3,000 million nuts of which about 1,800 million nuts are required for domestic curry nut consumption.

The CGA also called for a campaign to boost yield to 4,000 coconuts per acre to raise the annual crop and ensure enough nuts are available for industry and domestic use.

The CGA statement was in response to a call for expressions of interest by the Public Enterprises Reform Commission (PERC) for the defunct state-owned British Ceylon Corporation (BCC), which once held a commanding position in the manufacture and export of coconut oil.

CGA said that although it did not have sufficient resources to bid for the BCC complex, BCC should continue production of coconut oil and other products to support the coconut growing industry.

Dias pointed out that the edible oil tank farm owned by BCC, the only one of its kind in Sri Lanka, was leased to a Pettah trader to stock imported cheap palm oil which ultimately led to competition with locally produced coconut oil and the adulteration of pure coconut oil. With the lease, the coconut industry lost access to this storage facility and also pipe lines connecting the tanks to the Port of Colombo, which enable easy transfer of coconut oil from the storage tanks to the port for shipment abroad.

This facility should be reserved for the coconut industry, Dias said. Other existing machines, land and buildings could be disposed of and proceeds from such sales could be utilized to meet existing commitments to bank, ETF, EPF and gratuity payments to employees. CGA suggested the allocation of funds to set up a coconut oil milling plant on a green field site to be managed by the private sector, with adequate working capital.

The tank farm and pipeline should be formed as a separate company under private sector management, it said. CGA said that at that time when the coconut oil industry was handled by the private sector, Sri Lankan coconut oil was considered the best in the world and commanded a premium price.

But with the passage of time and since the take over of BCC, the modern date technology and machinery fell into disuse, leading to the erosion of Sri Lanka's position as a market leader.

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