Oilpalm crushing units face capacity crash

The existing contract farming has turned the oilpalm crushing units in the state into underperformers.

Oilpalm millers find that the existing contract farming does not ensure achieving the full capacity utilisation of the crushing mills though the state has ensured enough incentives for extensive oilpalm plantation. There are about eight oilpalm crushing units currently under operation in the state.

"The current contract farming does not allow captive plantation which makes the establishment of the mill unviable for the processor or manufacturer until area expansion is undertaken. But now the plantation of the crop is slowly picking up among farmers as it gives returns during off-season as well," Sanjay Goenka, vice-president of Foods,Fats and Fertilisers Limited, told Business Standard.

He said that for a fast and good development, contiguous areas were ideal as it would ensure good yield per hectare to the fragmented pockets of oilpalm plantation.

According to Goenka, establishment of a 2.5 tonnes per hectare mill costs about Rs 5 crore. The mill reaches a full capacity utilisation with about 10,500 tonnes of fresh fruit bunches (FFBs). But this can be achieved only in the eighth year of plantation when the crop reaches a peak yield of 18 tonnes per hectare and when cultivation is extended over an area of about 600 hectares.

Under the present contract farming, the company has to purchase the FFBs from the zonalised areas only as per the Oilpalm Act of Andhra Pradesh. "This augurs well for the interested farmer but fails to meet the actual demand of the crushing mill," he said.

Prabhakar Reddy, divisional officer, AP Oilfed, Eluru, said that though subsidy was being given for taking up oilpalm plantation, it is only from the third year that the yield starts to fetch returns for the farmer. The processing unit as such achieves break even in the fourth year from establishment though the yield peaks towards the seventh year from plantation, he said.

Explaining the potential for growth that oilpalm held, Goenka said, "With about 50 lakh hectares of land under oilseeds production and on an average produce of about one tonne of oil per hectare, the production is roughly 40 lakh tonnes of edible oil per year. Had this entire area been under oilpalm, India would have been producing 200 lakh tonnes of oil."

One hectare of oilpalm produces roughly 3-4 tonnes of crude oil as against any other edible oil bearing crop that can yield a maximum of one tonne per hectare, he said.

Bucha Reddy, assistant director, AP Horticulture Department, said that of the total four lakh hectares that has the oilpalm growth potential in the state, only 43,000 hectares was currently under oilpalm cultivation.

Reddy said that the crop ensures harvest throughout the year at about fortnightly intervals and that it currently fetches Rs 3,800 per tonne of FFB for the farmer in the state.

A total of 10 districts, including nine coastal districts and Khammam, have undertaken oilpalm cultivation. According to Reddy, the state government was providing a 75 per cent subsidy on the plant material amounting to Rs 7,500 on about 150 saplings per hectare.

A further subsidy was being offered as cultivation subsidy to the extent of Rs 15,500 per hectare subject to a limit of 15 hectares. Drip irrigation subsidy at 50 per cent was part of the scheme, he said.

Reddy said that the area under oilpalm plantation was on the rise in the state and that they had undertaken 5,000 hectares of plantation under the subsidised scheme last year.

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Under-utilised

• Establishment of a 2.5 tonnes per hectare mill costs about Rs 5 crore
• Crop reaches peak yield in the seventh to eighth year of plantation
• The mill reaches a full capacity utilisation with about 10,500 tonnes of fresh fruit bunches (FFBs)