Production of groundnut oil in Gujarat, which accounts for 40% of the total production in India, has fallen drastically, with most of the 200 units in Saurashtra being entirely shut down in the wake of the Centre’s demonetisation move and the resultant shortfall in supply of raw materials from the rural areas. The handful of units that continue to be operational are producing at 10% of their regular capacity.
Sameer Shah, president, Saurashtra Oil Mills Association (SOMA), said, “This year saw a bumper stock of groundnut and cotton in Saurashtra. The produce is brought by the farmers to the agricultural produce market committees (APMCs), from where we purchase and process them. Now, with most APMCs shut since the demonetisation announcement, oil mills have been forced to shut down as well due to lack of supply.”
According to Shah, 3,000 metric tonne of groundnut oil are produced each day in Saurashtra alone. The region is also home to about 50 refining mills, most of which have been shut.
In a letter addressed to Prime Minister Narendra Modi asking him to rethink his decision to demonetise currency, SOMA pointed out that almost 90% of retail transactions are in cash since there is no guarantee of cheques being honoured in time. The letter further stated, “The total halt of trading of almost all agricultural commodities ever since the pronouncement of this decision has already crippled our rural economy.”
Speaking to FE, Shah said, “We expect to hear from the government soon. Meanwhile, prices are already on the rise due to the shortage in supply. In the last 10 days or so, groundnut oil prices have seen a jump of about R80 to R100 per tin.”
Traders fear prices may further rise if the shortage in supply continues.
In Rajkot’s Gondal APMC, trading began on Monday on a tepid note, with arrivals of groundnut having halved from arrivals recorded before the demonetisation. “Groundnut arrivals were 10,545 quintals per day. Today, only 4,295 quintals were auctioned,” an official said.