Tamil Nadu

Inflation has taken profits out of gingelly oil business

— PHOTO:M.GOVARTHAN

Plummeting profits: The soaring inflation has not even spared the oil mill owners whose profits are dropping.

Soaring inflation, the resultant price rise and power cuts have ensured that not only sesame seed gets crushed at gingelly oil mills but also profit margins.

The 40-plus gingelly oil mills in and Erode buy their seeds from across India. And it varies with season.

For the three months beginning March, the mill owners source sesame seeds from Vridachalam, Jeyankondam, Kallakurichi, Tiruchi and other areas. For the next three months they get their seeds from Kolkotta and other parts of West Bengal.

In the next trimester the oil millers buy their seeds from Warrangal, Nellore and other parts of Andhra Pradesh. And, in last quarter of the year, they buy it from traders in Gujarat, Maharashtra, Orissa and other places. In transporting the seeds, the oil millers pay more.

‘The transportation cost has increased by at least Rs. 2 a kg. We now pay around Rs. 50,000 for a lorry carrying 10 tonnes of sesame from West Bengal,’said A.B.S. Thangavelu of A.B.S. Oil Mills.

His is a 50-year-old company with a capacity to grind up to 1,500 bags of sesame a week. A bag of sesame weighs 75 kg.

The rise in prices of sesame seeds has also to do with the vagaries of monsoon. For example, this year the output from West Bengal has been rather poor.

‘Unexpected rain and flooding have reduced the output,’ said P. Sachithanandan of P.P.S. Oil Mill. As a result the prices of seeds have gone up. The minimum price of sesame seed from Kolkotta which was Rs. 20 a kg in 2007 has gone up to Rs. 40, Mr. Thangavelu points out.

The seeds usually come cheaper because the percentage of oil that can be extracted is lesser than seeds from other areas.

Seeds from other parts of the Country in 2006 was around Rs. 30 a kg. Today it is between Rs. 50 and 60. The oil millers usually get 44 kg of oil for every 100 kg of seed. The seeds from West Bengal produce10 kg less.

The other reason for the rise in prices, the oil millers say, is that a huge of chunk of sesame seeds are exported. China, South Korea, Turkey and U.S. buy in bulk, creating a shortage in domestic market. The countries particularly look for white and red sesame seeds, which are superior in quality.

The countries not only take away a huge quantity of seeds but at a better price as well. They pay more than what Indian mill owners can afford. So, traders are more interested in selling to the countries, explains Mr. Thangavelu, who is the secretary of the Erode Gingelly Oil Manufacturers’ Association.

Then there is the rise in cost of production for farmers, who is hit by increasing prices and shortage of fertilisers. There is also the increase in wages. Oil mills that paid Rs. 8 an hour for a eight hour shift a day now pay Rs. 12.

Labour is in demand, says Mr. Sachithanandan. As a result a kg of gingelly oil that was Rs. 60 in 2007 now stands at Rs. 100. The oil millers say that even the increased price does not bring in profits. We just about manage to meet out the operating cost and pay labour, they say. Added to this is the frequent power cuts. The mills in Erode have a power holiday on Wednesdays and halt their machines between six and 10 in the evenings.

Their only solace comes from the increase in prices of sesame cake, a waste that is used in cattle feed.

‘We meet our expenses and get whatever profits from the cake, which now sells at Rs. 1,100 a bag as against Rs. 800 in the last year,’ Mr. Thangavelu says.

A bag of cake weighs 80 kg.

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