Vanilco warns procurement ban, seeks govt bailout

Vanilla India Producers Co (Vanilco) is likely to withdraw from procurement operations during the next harvesting season, said Paul Jose, managing director.

He told Business Standard that unless central government and Spices Board initiated action to bail out the 80,000 and more vanilla farmers, there would be utter chaos during the next season.

The board of directors of the company will meet shortly to take a final call on staying away from procurement in the next season.

"We will stay away from procurements. Jairam Ramesh, minister of state for commerce and industries, had informed us that the issue would be discussed in detail during the first week of July. But so far nothing has happened. The ball is now in the court of the government and Spices Board. We are still expecting a call from Delhi and, if there is no positive response from the ministry and the board, we will not intervene in the market," he said.

Vanilco is already having a stock of 24 tonne of cured beans as carry over of the last season. This is enough to supply for the next two years and further procurement will be suicidal for the company, he said.

The government has to instruct ice cream and other similar food products companies to use one per cent natural vanilla in all their products so that the domestic market could get a life. In India, nearly 700 tonne of synthetic vanilla is being imported annually, but the usage of natural vanilla is hardly 3 tonne.

One per cent shift from synthetic to natural vanilla will increase domestic consumption to 7 tonne. The country's total annual production of vanilla extract is 7-8 tonne, and if the government issues a notification in this regard, the crisis would vanish.

At present, Amul and Kerala State Co-operative Milk Marketing Federation (Milma) are using natural vanilla and Vanilco is supplying 100 kg of vanilla extract to these agencies.

In developed nations, 10 per cent of the total consumption is natural vanilla while in India it is rather negligible. He added that as Vanilco is on the verge of a crisis, it is not in a position to start procurement in the next season (September "� October).

During the last season, the company had procured 132 tonne of green beans at an average price of Rs 125 a kg. Carry over stock is a serious problem, which the company is facing and the call options introduced a few months back had evoked poor response in the global market.

The higher price tags of $60 and $80 for a kg of vanilla extract has been the disadvantage to the option trading as global price is hovering around $35 to $40. Meanwhile, as harvesting season is approaching, it is estimated that total production would be doubled this time.

According to latest estimates, total production will be more than 1,200 tonne of green beans and farmers are disappointed with the attitude of central government and Spices Board.

A farmer said that the wrong steps of Spices Board to increase production without putting a marketing strategy had created the crisis. He also said that unless government intervenes, vanilla beans could be used as cattle feed this time.

Paul Jose also said that government agencies such as Spices Board or STC should be entrusted with procurement operation, otherwise there would be suicide death of vanilla farmers too.