Reduced Imports Fueled Jump in Coco Oil Prices in Sri Lanka

Drastic drop in imports following the aflatoxin controversy coupled with reduced local production in Sri Lanka propelled coconut oil prices in the market to new high to meet the annual consumption of around 200,000 MT according to industry officials, The Island online reported on May 09.  In 2020, local coconut oil production was a negligible 20,000 MT, which translated into a yawning gap that had to be bridged by importing 180,000 MT, they said.  

Local production of coconut oil fell steeply due to high coconut prices, making it uncompetitive with imports, says M. L. D. Niroshana, Director-General of the Coconut Development Authority.  On an average price of Rs. 85 each, it requires nine to ten nuts to extract a liter of coconut oil, and they need to sell a 750ml bottle for around Rs. 500 to make a small profit.  However, this was not feasible when imports were available at a more competitive price, he noted.  Previously, a 750ml bottle of coconut oil was selling at anything between Rs. 320-380.  

Sri Lanka’s coconut production in 2020 was 2,760 million nuts, which fell short of the 3,000 million target.  The figure was envisaged to reach 3,600 million at peak.  As in any business, private millers are also driven by profits.  As long as nut prices remain high, local coconut oil will also be costly as they go hand in hand, Niroshana pointed out. “More millers will be encouraged to take to extracting coconut oil if imports are limited and market conditions and prices are good”. 

Meanwhile, in a bid to mitigate the ballooning prices in the market, the government has permitted only the state-owned BCC Lanka to import desiccated coconut up to a maximum of 13,000 MT per month under a Special Commodity Levy (SCL) of one rupee per kilo, industry officials said.  On the recommendation of the Industries Ministry, the consignments will be allowed for a period of three months with effect from April 28, 2021, they said.  The stocks are likely to be imported from Indonesia instead of India because of the raging coronavirus pandemic there, they noted.  According to a Finance Ministry directive, a SCL of Rs. 300 per kilo will be imposed on importers of desiccated coconut.