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Lockdown cripples India’s MSME-dominated mustard oil industry; recovery may take multiple months.


Date: 17-04-2020
Subject: Lockdown cripples India’s MSME-dominated mustard oil industry; recovery may take multiple months
Trade, import and export for MSMEs: In India, mustard oil manufacturing is carried out by a large number of MSME units, as a result of which such manufacturing activities largely comprise an unorganized endeavour. There are around 7,000-9,000 mustard oil extracting units, out of which 25-30 per cent are registered in the organized sector. The industry has an installed capacity for processing 7.5 million tonnes annually of mustard seeds annually. Mustard oil consumption is increasing at a rate of around 20 per cent every year as consumers are gaining a better understanding of the health benefits of Mustard Oil. Demand for mustard oil comes from both rural and urban areas and is consistent owing to its varied applications. Apart from being used as cooking oil, it is also used in the preparation of pickles, and for skin care, hair care and in various home remedies.

Last month, the manufacturing of mustard oil came to a standstill and supplies were severely disrupted after the sudden announcement of a nationwide lockdown. There was a sigh of relief for the industry as mustard oil was placed in the essential item’s category; however, various practical problems cropped up – the basic one being the lack of inflow of raw material that is oilseed from mustard producing states because of confusion in inter-state transportation. One such issue is that mustard oil cake, a by-product, is used as cattle feed but there is ambiguity about whether this is an essential item or not. Because of these two reasons, the optimum capacities of the facilities were not fully utilised.

Labour availability still remains a major concern in spite of all the support from both the central and state governments. This problem persisted despite having the necessary passes and permissions because in some cases, the family members were worried and did not allow workers to step out of their homes.


Startup India
Lockdown cripples India’s MSME-dominated mustard oil industry; recovery may take multiple months
Published: April 16, 2020 6:43:53 PM
Trade, import and export for MSMEs: The manufacturing of mustard oil came to a standstill and supplies were severely disrupted after the sudden announcement of a nationwide lockdown.

Labour availability still remains a major concern for MSMEs in mustard oil segment. (Representative image)
By Vivek Puri
Trade, import and export for MSMEs: In India, mustard oil manufacturing is carried out by a large number of MSME units, as a result of which such manufacturing activities largely comprise an unorganized endeavour. There are around 7,000-9,000 mustard oil extracting units, out of which 25-30 per cent are registered in the organized sector. The industry has an installed capacity for processing 7.5 million tonnes annually of mustard seeds annually. Mustard oil consumption is increasing at a rate of around 20 per cent every year as consumers are gaining a better understanding of the health benefits of Mustard Oil. Demand for mustard oil comes from both rural and urban areas and is consistent owing to its varied applications. Apart from being used as cooking oil, it is also used in the preparation of pickles, and for skin care, hair care and in various home remedies.

Last month, the manufacturing of mustard oil came to a standstill and supplies were severely disrupted after the sudden announcement of a nationwide lockdown. There was a sigh of relief for the industry as mustard oil was placed in the essential item’s category; however, various practical problems cropped up – the basic one being the lack of inflow of raw material that is oilseed from mustard producing states because of confusion in inter-state transportation. One such issue is that mustard oil cake, a by-product, is used as cattle feed but there is ambiguity about whether this is an essential item or not. Because of these two reasons, the optimum capacities of the facilities were not fully utilised.

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Labour availability still remains a major concern in spite of all the support from both the central and state governments. This problem persisted despite having the necessary passes and permissions because in some cases, the family members were worried and did not allow workers to step out of their homes.

Also read: Govt to buy stakes in MSMEs going public from soon-to-be cleared Fund of Funds, says Nitin Gadkari

Some even face problems in finding transportation to commute to the plant because of disruptions caused by some transiting villages. Hence, migrant labour and transportation still remain in short supply. Initially, the packaging industry was not kept under the essential item’s category; this has led to an erratic supply chain. However, of late the packaging industry has been exempt from the lockdown but the practical ground-level problems still persist and obtaining ready-to-use caps, pet jars, bottles, tin, pouches, labels and corrugated boxes and many others is a major challenge. The back-end sourcing of raw material and labour problem persists even for the manufacturers and suppliers of packaging material. Hence this process will take some more time to streamline. Moreover, we also have to ensure that prices remain competitive across all markets.

Another concern is at the distributors and retailers end. Distributors are also facing problems in unloading consignments and distributing goods onward to the retailers because they too are grappling with labour and local transportation problems. We anticipate the entire process will take three-four weeks to streamline even though the government is trying very hard to alleviate the hurdles across the entire process. The new mustard crop which is generally harvested during this time every year is expected to be very good. Due to the arrival of the new crop at this time, ideally, the prices of mustard seed should have dropped leading to a drop in mustard oil prices. However, on the contrary, the prices have risen due to these disruptions affecting adversely the cost-sensitive industry and the consumers alike.

Source:- financialexpress.com

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