Edible oil firms to buy seeds directly from empanelled farmers and APMCs

Large and mid-sized firms are likelt to save some costs using this mechanism, some of which will be passed on to farmers

Oilseed crushing units and branded edible oil companies are planning to empanel farmers in order to buy directly from them, although the facility will be useful only when kharif crop arrivals begin after September. This is because a large part of the rabi seeds have been harvested and farmers usually sell them in the APMCs. Big edible oil companies are planning to continue buying seeds from APMCs as well as directly from farmers.

Discussion with large and mid-sized firms reveal that they will save some costs, some of which will be passed on to farmers. The price at which commodities are traded in the APMCs will act as a reference or benchmark for units whenever they buy seeds. The edible oil crushing industry was the first to ask for facilities to buy directly from farmers since the lockdown began. At that time a whole lot of labour and transportation issues emerged, making it difficult for plants to source raw material.

Industrial units are still studying the new order permitting direct purchases, and discussing with their partners across the value chain on procurement operations going forward. They are also awaiting rules being framed under the new law to get a better clarity.

According to Adani Wilmar’s Deputy Chief Executive Officer Angshu Mallick, since most of the current crop arrivals are over, the company will take a call by October when new crop arrivals begin. However, for its edible oil portfolio, sold under the brand of 'Fortune', Adani Wilmar may buy soyabean and mustard seeds directly from farmers in the near future.

"It will benefit both farmers and us, and with some savings on APMC taxes while incurring additional costs on handling direct purchase from farmers, there will be some net saving which can be passed on to farmers even as the process of price discovery takes place. However, it may still be partial direct buying and partial through mandis, especially in case of large bulk orders," said Mallick. While the company has a list of such potential farmers through whom it can buy directly, Adani Wilmar will now start getting in touch with them.

Mallick added that infrastructure around storage and handling systems will have to be improved before direct buying from farmers begin from October.

If there is a business, several players will start investing in infrastructure. According to B V Mehta, Executive Director, the Solvent Extractors’ Association of India, “Allowing farmers to sell outside mandis is a much-awaited reform and now it will help two way. Farmers will realise better price and there will be cost saving in two way transport, mandi fee etc. On the other side, APMCs will taste competition and also improve facilities and services.”

One industry observers say that, if market yards, APMCs set up additional facilities for testing oil or even assaying and grading of various commodities, that will help farmers realise better price even at market yard.