CDA, private sector to minimise waste

by D. J. U. Purasinghe, Chairman, CDA

Coconut, one of the major plantation crops plays a pivotal role in the economy of Sri Lanka. Its role as a major protein and fat supplement in the diets of an average Sri Lankan could not be quantified easily. It also contributes significantly towards forex earnings and in 2007 export 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 had been exported to about 125 countries. However, 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 shown a 76% increase from Rs. 17 per nut in December 2006 to Rs. 30 in June 2008. Coconut oil was 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 had been a crucial topic of talk shows among the public and the media in the recent past. The Coconut Development Authority was blamed for this situation and the CDA was almost squeezed by the media and sector for an instant remedy.

Therefore although the CDA’s mandate is mostly confined to the coconut industry the CDA has to act promptly to ensure the availability of a sufficient quantity of coconuts at a reasonable price to sustain the industry.

High prices

The price of a coconut is mostly determined by the National Annual Coconut Production of the country. However, the average annual production of coconut has hovered around 2,700 million to 2,800 million nuts without any progress over the past decade and as such the productivity of land is also almost stagnant at 3,000 nuts per annum/acre.

At the same time on average 75% of the nut production is consumed locally and local consumption has been on the increase over the years due to the population growth. As a result the surplus for the coconut based industries such as desiccated coconut, copra, coconut oil, coconut milk and coconut milk powder/coconut cream keeps shrinking.

Invariably the price of coconut in Sri Lanka remains much higher than other countries. eg. Indonesia Rs. 13, India Rs. 19, Philippines Rs. 14. The removal of VAT on coconut oil production has activated the coconut oil industry from a mere 20,000 in 2005 to about 84,000 MT in 2007. As a result all coconut based industries compete to procure the limited number of coconuts.

The domestic consumption of coconut oil and vegetable oils has been estimated at about 160,000 MT per annum. The national production of coconut oil amounted to around 84,000 MT in 2007, leaving a deficit of about 75,000 MT of coconut oil in 2007. This is being met by other types of imported substitute vegetable oils especially palm oil.

The 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 USD 62/Barrel to USD 142/Barrel within 15 months from December 2006 to June 2008.

As a result most countries have started to use vegetable oil to produce a substitute-fuel Bio Diesel and even some countries have gone to the extent 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 to a greater extent.

Prior to the early 80s Sri Lanka had achieved self-sufficiency in coconut production. The 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 usage of vegetable oils with the improvement in economic growth, the local consumption of vegetable oil increased substantially and this pushed up the demand for vegetable oils.

Meanwhile, the fragmentation of coconut lands, pest and disease menace and low out-turn of a new variety of coconuts (reduction in weight of kernel per nut), poor management practices caused a negative impact on the net availability of coconuts.

Therefore if Sri Lanka needs to achieve self-sufficiency again the present total nut requirement will be about 4,000 million nuts as given in the table.

Safeguarding industry

This target is far from the present actual production situation of less than 3,000 million nuts. Even if we want to ensure that the coconut industry operates at a sustainable level without much burden to the local consumers, we should be able to achieve at least 3,500 million nuts per year in the short run.

Therefore, we are obliged to formulate some effective short term, medium term and long term measures to safeguard the industry and the consumer’s interest.

The CDA has mooted a new concept known as wastage minimisation 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 nuts alone.

Thus the total consumption of coconut in Sri Lanka per annum amounted to almost 2,451 million or 85% of the total production of 2,869 million nuts in 2007 in the form of fresh nut and coconut oil.

According to a CDA study about 35% of coconuts used for culinary purposes in the household is wasted - 536 million per year due to inefficient extraction methods and it is wasted along with the residue.

In addition a large quantity of fibre, coconut shell and coconut water are wasted due to the present usage practice.

The total wastage in terms of value on coconut kernel, coir fibre, coconut shell, coconut water and paring oil is estimated at around Rs. 25 billion per annum. Apart from this transport, loading, unloading and storage costs much time and money.

As such by popularising and promoting value added easy to use products such as coconut milk, coconut milk powder, coconut cream, coconut paste and desiccated coconut in the local market on a gradual phase over a period of five to 10 years it is expected to save a substantial quantity of coconuts up to 200 million to 300 million nuts per annum.

By saving a substantial quantity of nuts in the household the surplus of the nuts for the coconut industry could be improved.

To be continued