Q : How has the scenario in the logistics of Edible Oil changed over the years?

Ans : I have been associated with Vegetable Oil Industry since the early eighties and have witnessed the evolving landscape from close quarters. In the eighties and early part of nineties, Edible oils were canalised through STC and they used to allocate oil to Vanaspati Industry. All major suppliers to India from Malaysia, Indonesia and Latin America etc. had to take part in regular tenders and plan their sales on the basis of STC tenders. Honestly, it was not the best way to source edible oils and the trick for the suppliers was to get information before-hand about upcoming tenders for taking positions.

With India opening up in the nineties, the rules of the game changed big time. Most of the big boys either got into Joint Ventures with Indian partners or had set up their own units in India. Trade became much more transparent which resulted in the consolidation of the industry.

The role of logistics both in International sourcing and local distribution within India can never be underestimated. Saving a few dollars in the Ocean freight can make a huge difference in terms of success and failure. The same goes for local distribution. Needless to say, margins in the Edible Oil Trade are wafer-thin and optimising logistic costs goes a long way in creating a sustainable business model.

Q : In the past, you have estimated the demand for consumption of Edible Oils in India to increase at about 5% year-on-year. Do you still feel the same?

Ans : The Edible Oil consumption in India on the strength of low import duties has grown exponentially over time. In the late nineties, the dependence of India on imports was only about 3 per cent which has now ballooned to around 150 lakh tonnes (15 million), making India the biggest importer of edible oils in the world. The flip side of this growth story has been the stagnation of the domestic Oilseed sector and dependence on the imports to the extent of 70 per cent of our country’s consumption. Being alarmed at this gradual surrender of our Edible Oil Security, the decision makers have now realised the importance of raising the edible oil import duties in order to protect Indian Oilseed grower. Hike in the import duties has resulted in moderating the demand in India. Earlier, we were estimating our growth to be in and around 5 per cent, but now we feel the consumption growth would be closer to 3 per cent.

Q : Do you see more investments coming in port-based refining for Edible Oils in India or will it be majorly refined Oil imports?

Ans : India already has excess capacity and we do not visualise more investment coming in port refining. However, we may witness more consolidation going forward. Weak players may get elbowed out and be bought over.

As the President of SEA (the apex body of Oil Trade in India), I am fighting tooth and nail against Refined Oil imports into India as it goes against the objective of ‘Make In India’. I feel the Refined Oil imports are not in Indian interests and would gradually be discouraged.

Q : What is your view on long-term imports of edible oil and oil-seeds?

Ans : Edible Oil imports are here to stay. The only thing we should aim to do is to raise local Oilseed production and cap the import dependence at current levels. All incremental requirement of the country should be met from the domestic Oilseeds.

We have been suggesting the Government to allow Oilseed import during our lean months, say from April to September. This will not affect our Oilseed farmer and also help the domestic Poultry and Cattle Feed Sector in getting competitive prices. Moreover, value addition would happen in India. These suggestions, however, have still not been given its due importance.

Q : What is your view on export and import of agri-commodities in India? Which would contribute to higher volumes in the EXIM trade?

Ans : Let's face it, India is a high cost Agri producer and coupled with high MSP our Export Competitiveness in practically all commodities is pretty low, except perhaps Rice. Rice will continue to be our mainstay in Agri Exports apart from Castor Oil and a whole range of Oil meals, like Soya, Rape, Rice Bran, and Castor etc. With China and USA in midst of Trade war, India has a golden opportunity to increase its exports to China as they have to diversify their import dependence. India is struggling with massive Sugar inventories, and with suitable incentives, we can offload almost 4-5 million tonnes in the World market.

If India has to increase its Agri Exports we will have to give incentives to increase competitiveness with other origins. How far it would be WTO compatible we don't know.

Q : What is your view on the Indian Cold Chain infrastructure?

Ans : India has a fairly strong Cold Chain Infrastructure, however, it is heavily skewed in favour of cold stores dedicated to low-value Potatoes and Onions. India seriously lacks Reefer Trucks and intermediate Cold Chains to ensure cargoes don’t get thermal shocks.

The capacity to pay of Indian consumers is rising and they are becoming more and more demanding. All this augurs well for this Sunshine Sector which is crying for investment.

Q : Has crop forecasting matured in India? Can we rely on the estimates and data by Government departments?

Ans : I would probably say crop forecasting is still work-in-process and has not yet matured to the desired levels. Most of the Trade bodies do their own crop surveys and their numbers are invariably at variance with the Government figures. It is a tragedy that India still does not have a body like the United States Department of Agriculture (USDA) which monitors crop-development and provides timely advisories. In the absence of real time data proper decision making is always a challenge.

Let us move towards Sugar

Q : How do you see India dealing with excess stock of Sugar, as it is estimated that India will have an opening stock of 10.8 million tonnes when it starts the next crushing season in October this year?

Ans : India is truly a swing State as far as Sugar is concerned with high FRP and SAP our farmers who have merrily kept on producing more and more cane to make India the largest producer of Sugar, beating Brazil to the second place. The high production of Sugar (32 million tonnes) with the consumption hovering around 26 million tonnes is bound to result in excess inventory stressing Sugar Sector.

The only viable solution at this point of time seems to be in biting the bullet and exporting at whatever rate possible. This would mean giving incentives to ensure that the Mills do not lose more money. All this is easier said than done, as it may not be WTO compatible and might open our country to legal challenges internationally.

The other solution is to divert as much Cane juice as possible towards ethanol. A good beginning has been made by not only allowing Ethanol to be made from B heavy molasses and cane juice but also giving a higher price for the same. We still feel, to have any meaningful impact in new Cane Crushing season the price of Ethanol made from Cane Juice should be increased by another Rs.5 per litre to minimum Rs.52 or Rs.53 per litre.

Q : Will India become a perpetual exporter of Sugar like Brazil, especially considering the new policy on the mandatory MSP for Sugar?

Ans : High MSP has a flip side to it as well as it makes our Sugar uncompetitive in the international market. If India has to become a perpetual exporter of Sugar with high MSP, we will have to give Perpetual Incentives to make exports viable.

It would be interesting to see how things pan out if India suffers a drought. The rules of the game may again undergo a huge change.

Q : Do you feel Ethanol policy of India as a game changer for the Sugar industry?

Ans : Absolutely! India has learnt from Brazil. Ethanol Policy kills many birds in one stone. It is environmentfriendly, cuts down on Crude Import Bill and ensures remunerative prices to farmers for Cane. All in all, it is a wonderful initiative and would go a long way in improving the health of the Sugar sector.

Q : Do you see Paradip, Orissa as a strategic location for EXIM trade in Agri commodities?

Ans : I would congratulate J M BAXI GROUP for realising the importance of Paradip in Orissa. That part of India has remained relatively underdeveloped and it cannot be kept down for long.

With Kolkata and Haldia losing the importance on account of heavy silting and inefficiencies Paradip is bound to grow as the gateway not only to Orissa but also to Chhattisgarh and even West Bengal. If properly marketed Paradip can become the next Kandla of the East.

Q : What do you think of the Indian dry bulk logistics infrastructure in terms of Agri-Commodities?

Ans : With the development of ports which are capable of handling Panamaxes and Cape Size vessels, the rules of the game have undergone a sea change. Higher capacity vessels go a long way in reducing and optimising costs and is the way forward for commodities like Coal, Iron Ore etc.

Q : What is the one crucial area that needs focused effort for improvement in Agri-Commodity logistics?

Ans : Not many realise that the customers also need to be told what is good for them and in their interest. Educating clients and helping them optimise costs would go a long way in building an everlasting relationship.

Q : Lastly your advice to the port and maritime logistics fraternity as your partners in business?

Ans : Maritime logistics is evolving on a continuous basis and it’s important to keep tab of the trade flows. My sincere advice to Port and Logistics Operators is to hire ‘Domain Experts’ of target Commodities as that would reduce their own learning curve and also help in understanding the client requirements much better.

J M BAXI is a well-known and highly respected name in Maritime Logistics and we wish them The Very Best.