Report on Price Policy for Copra for the 2000 Season

            In this report the Commission presents its views on the price policy for copra for the 2000 season. The Commission recommends that:

(i)         in view of the heavy losses due to, and the high cost of controlling, the infestation of mites in coconut producing states, some Central financial assistance on matching basis be extended to supplement the efforts of the State Governments on the understanding that the assistance so extended be implemented, under the co-ordination of the State Government concerned, through the Grama Panchayats and not through individual farmers;                                                                                         (Para 7) 

(ii)        the Kerala Government's proposal for Central financial assistance for an accelerated programme of disease control be considered urgently by the Centre but that, while doing so, the economic effectiveness of alternative approaches be fully explored. Further, since pest and disease problem in other coconut growing states have had less attention, it is necessary that CDB and CPCRI should expand their efforts to address the disease and pest problems peculiar to these other states;                             (Para 9)

 (iii)       the Government announce in advance its plans for tariffication  of copra, coconut oil and other coconut products and also adjust upwards the tariff on vegetable oils, particularly palmolein and palm kernel oil, within the bound rates submitted to the WTO;                                            (Para 11)

 

 (iv)       the capabilities of the Coconut Development Board be suitably strengthened by appointing a full-time Chairman who is an expert on the subject, by augmenting the Board's ability to provide effective technological and marketing consultancy to the private sector, and by providing it with the flexibility and resources to identify and encourage quick yielding productivity measures while continuing with its existing long-term programmes;                                                                               (Para 12)

 (v)        (a)        as and when the minimum support prices for copra are announced, the Government of India should advise the National Agricultural Co-operative Marketing Federation (NAFED) to work out a corresponding indicative price per nut separately for each state and the islands, and give wide publicity to it through its co-operative net works as well as through the apparatus of the local administrations;

             (b)        the local administrations should assist co-operative institutions to implement these prices in their village markets; and

             (c)        the State Governments of the major coconut producing regions may explore the possibility of model contracts based on these indicative prices between coconut processing units and the growers of coconut around their areas of operation;                                        (Para 13)

 (vi)       for the 2000 season, the minimum support price be fixed for the fair average quality of milling copra at Rs 3250 per quintal and of ball copra at Rs 3500 per quintal.                         (Para 16)

 2.         The Commission submitted its report on price policy for copra for the 1999 season on October 30, 1998. In the report, it recommended inter alia that the minimum support price (MSP) for the fair average quality of milling copra be fixed at Rs 3075 per quintal and of ball copra at Rs 3325 per quintal. On February 4, 1999 the Government announced the minimum support price of milling copra at Rs 3100 per quintal and of ball copra at Rs 3325 per quintal. These prices mark an increase of Rs 200 per quintal for both varieties of copra over their respective minimum support prices fixed for the preceding season.                                                                                                       (Table 1)

3.         Although the MSPs were announced much earlier in 1999 than in the previous year, more than a month of the copra-marketing season had already elapsed by the time of this announcement. Unlike in the preceding season, however, prices of copra during 1999 have been ruling higher than the minimum support prices fixed. The index number of wholesale prices (1981-82 =100) of copra, which at 372.1 in January 1998 was 17.5 per cent lower than in January 1997 and had fallen to 314.9 in May 1998 taking copra prices well below the MSP for that year, continued to be relatively low at 371.7 in January 1999. Thereafter, the index increased steadily during the peak marketing months to reach 406.2 in April 1999, which was 22.1 per cent higher than in the corresponding month of 1998. Though the index had declined slightly from this level during the subsequent three months, it again increased to reach 406.1 in August and in September 1999 was, at 404.1, higher by 21.4 per cent than in September 1998. During the peak marketing period of January-May 1999, the month-end wholesale  prices of milling copra were higher than the minimum support price by Rs 450-750 per quintal at Alappuzha (Kerala), Rs 200-550 per quintal at Kozhikode (Kerala), and Rs 200-369 per quintal at Mangalore (Karnataka). The prices of ball copra, produced mainly in Karnataka, were higher by Rs 425-925 per quintal than its respective minimum support price. The National Agricultural Co-operative Marketing Federation (NAFED) and its agencies were not therefore required to undertake support operations in major producing states.                  (Tables 2 and 3)

4.         In addition to support operations, which become necessary in case market prices tend to crash below the minimum support price, the NAFED undertakes commercial purchases of copra for processing and sales through its co-operative net works in different states. The coconut oil produced from copra procured by the NAFED is also supplied to the public distribution system in Kerala. These operations are known to have a stabilising effect on the consumers prices of coconut oil. During the current season so far, the NAFED has purchased only 763 quintals of copra under its commercial operations, as against 8460 quintals purchased during 1998. The average price at which the purchases were made during the current year works out to Rs 3745 per quintal, which is 20.8 per cent higher than the MSP fixed. The NAFED has informed that KERAFED and MARKETFED have also undertaken commercial purchases of  copra during the current year.  (Table 4)

 5.         As in the case of copra, the prices of coconut oil and coconut during the current year ruled above its level last year. The average wholesale price indices of coconut oil, which had declined by 10.1 per cent from 407.3 in 1997 to 366.3 in 1998, have again started rising during 1999. The index has risen from 372.0 in January 1999 to 397.9 in April 1999. Afterwards, though the index has registered a slight decline, it has again gone up to 396.7 in August 1999. During January-August 1999, the month-end  wholesale  prices  of  coconut  oil  have been reported in the range of Rs 5000-5650 per quintal at Kozhikode and Rs 5000-5650 at Alappuzha. The index number of wholesale prices of coconut, which was at 358.2 in January 1999, exhibited its usual seasonal decline to reach 328.8 in July 1999 before recovering to 335.2 in August and further to 341.5 in September 1999.  At these levels, the WPI for coconut were 12.9, 17.6 and 21.7 per cent higher in January, July and September 1999 compared to the corresponding months of 1998. During the peak marketing period of January-May 1999, the month-end wholesale prices of coconut were quoted in Kerala in the range of Rs 3750-5000 per thousand nuts at Kozhikode and Rs 4800-5300 at Alappuzha. The prices in Karnataka, as quoted at Arsikere market, were between Rs 4300-5500.                                                                          (Tables 5, 6, 7 and 8) 

6.         The higher prices ruling in all the major markets during the current year is attributed mainly to a reported decline in the production of coconuts and copra. Coconut output, after increasing marginally from 13061 million nuts in 1996-97 to 13096 million nuts in 1997-98, is expected to have suffered a major set back during 1998-99. According to information furnished by the State government of Kerala, infestation by a new wind-borne pest, the eriophyid mite, which had appeared in about 5 per cent of coconut palms in Ernakulam district in 1998 has since spread rapidly and now affects over 20 million palms in different parts of Kerala. These mites infest at the early stage of pollination and cause poor development of nuts and reduce the size of the kernel. It is estimated that in severely affected areas the yield loss to the growers is as high as 50-60 per cent. During 1999, the resulting loss in coconut production is reported to have been about 35-40 per cent in the central districts of Trissur, Ernakulam, Kottayam and Alleppey; and the overall production during 1998-99 in the state is expected to be lower by about 5 to 10 per cent than the output of 5911 million nuts during 1997-98. No estimate of the production in other states during 1998-99 is available as yet, but since the mite infestation has spread to Tamil Nadu and Karnataka, and is reported to be severe in some districts of these states, production may be lower in these major coconut producing states also. The Coconut Development Board (CDB) has informed the Commission that copra arrivals in Kochi market during 1999 so far have been about 10 per cent lower than during the corresponding months of 1998, implying lower production of copra during 1998-99 than during 1997-98. However, no estimates of copra production, or indeed even of overall copra arrivals, are available for the current year in the absence of an adequate statistical system to collect the necessary data. In this context, it may be mentioned that the Commission has in the past recommended improvements in the statistical system so that timely and reliable estimates of coconut and copra production are available for the purposes of formulating price policy. Since an adequate data base is necessary to track the spread and severity of pest infestation, and its effect on coconut and copra production, improvements in the statistical system are also required for an effective response to the dangers of pest attacks, particularly of those like the eriophyid mite which are relatively new and there is inadequate knowledge regarding infestation patterns and the economic costs involved.

7.         During its field visits in Kerala, the Commission found that there is considerable concern regarding this mite infestation, and its likely effect on future coconut production, among growers, scientists, community leaders and officials involved. Research has already begun, at the Central Plantation Crop Research Institute (CPCRI) and elsewhere, into the identification of biological controls which can provide a long-run solution. But the only remedy identified so far is to either apply monocrotophos through root-feeding or to spray affected bunches at fortnightly intervals with decofol or an emulsion of neem oil with garlic in soap. However, root feeding has limited applicability in areas affected by the root wilt disease, and for spraying to be effective this has to be done at least three times consecutively. Moreover, if all the affected farmers do not apply the pesticides at the same time, the pests re-infest from palms which are not treated. While the pesticides are not very expensive, and are being subsidised by the State government, a major limiting factor in controlling these pests is the high labour cost of about Rs 10 per palm per spray, which the majority of the farmers who are relatively poor cannot afford to meet. Most panchayats in the severely affected areas have already begun subsidising part of the labour cost from the funds available to them under the state's decentralised Peoples Action Plan, although the required subsidy has to be borne by cutting some other programme. The current effort thus remains inadequate since, despite the seriousness of farmers and panchayats to combat the pest, there is a resource problem with the total cost of spraying at the current level of infestation being put at over Rs 60 crore for the state as a whole. As a result, farmers in the affected areas face costs much higher than normal on account both of the expenses on pest control and as a consequence of the lower yields obtained since the pest cannot be controlled fully either because weather conditions do not permit spraying in time or because not all farmers can adopt the necessary measures. The growers organisations have demanded a much higher MSP for copra to offset these extra costs. But, although the Commission is satisfied that there is indeed a serious problem of higher costs, it is of the opinion that increasing the MSP beyond normal would not be an efficient way of dealing with this. The higher Central funds required to maintain a MSP which sufficiently covers the cost of severely mite affected farmers would neither be targeted at the farmers most affected and nor would it elicit the community effort necessary to cope effectively with the problem. In the opinion of the Commission, a much better use of Central funds to mitigate the situation is by augmenting the resources of the panchayats in severely mite affected areas which are already dealing with the problem. Such funding can be provided either by the Ministry of Agriculture augmenting the CDBs ongoing programmes of dealing with pests and diseases or by suitably stepping up the allocation to mite affected states of certain Centrally sponsored schemes of the Ministry of Rural Development, such as Employment Assurance Scheme and Jawahar Gram Samaridhi Yojana, which can be availed of by panchayats. In mite-affected states other than Kerala, state governments may consider alternatives other than panchayats if the latter lack the motivation and organisational competence, but it should be understood that unless a management strategy is evolved at the community level for each affected coconut village with sufficient funds to meet the challenge, this pest could become a permanent problem. The Commission recommends that in view of the heavy losses due to, and high cost of controlling, the infestation of mites in coconut producing states, some Central financial assistance on matching basis be extended to supplement the efforts of the State Governments on the understanding that the assistance so extended be implemented, under the co-ordination of the State Government concerned, through the Grama Panchayats and not through individual farmers.

 8.         More generally, the Commission has in its recent reports been focusing on the need for an accelerated programme for the control and management of pests and diseases afflicting coconuts since this is necessary to keep up yield growth and to limit the escalation in the cost of production of coconut. This is because, despite a creditable growth of production at about 5 per cent during the eighties and nineties, from 5695 million nuts during the triennium ending (TE) 1980-81 to 9210 million nuts during TE 1990-91 and further to 13036 million nuts during TE 1997-98, there has been a sharp deceleration in productivity growth from 2.0 per cent per annum during the eighties to 0.6 per cent per annum during the nineties. It may be pertinent to note here that, the yield growth in the country was high, and much better than in other coconut producing countries until 1994-95, when the production of coconut reached an all time high at 13300 million nuts and the yield improved to 7760 nuts per hectare from 5317 and 6315 nuts per hectare in TE 1980-81 and TE 1990-91 respectively. Subsequently, there has been a steady decline in the all-India yield per hectare to only 6902 nuts per hectare in 1997-98, with the decline concentrated particularly in the states of Andhra Pradesh and Tamil Nadu but also affecting Assam, Orissa and West Bengal, in all of which the productivity growth has been negative during the nineties. A full analysis of this recent decline in yields is still not available, and extraneous events such as the cyclone which hit the east coast in 1996 are important factors, but there does appear to be a slackening of the development effort and an increase in the incidence of pests and diseases. The major diseases that generally afflict coconut trees are the root-wilt and leaf rot in Kerala, tatipaka and ganoderma in Andhra Pradesh, Thanjavoor-wilt in Tamil Nadu and stem bleeding in Karnataka, Kerala and Tamil Nadu. In the eastern states, a crown choking disease is reported to be affecting the coconut trees, particularly in Assam and West Bengal.

                                                                                                                     (Tables 9 and 10)

 9.         That significant benefits can be available from a focused programme of disease control is proven by the experience in Kerala, where the incidence of chronic disease in coconut palms is the greatest and where coconut yields are well below the national average. Here the efforts of the Coconut Development Board, which was established in 1981, show up quite distinctly. A long period of stagnant and/or declining yields was reversed during the eighties, and in fact, the rate of growth of productivity was accelerated from 1.21 per cent per annum during the eighties to 2.51 per cent during the nineties (upto 1997-98, before the mite attack this year). An important component of the CDB's effort in this state has been to provide subsidies to cut and replace palms affected by the debilitating root wilt disease which is over a hundred years old and for which there is no cure. Since 1987-88, more than 14 lakh affected trees have been cut in Kerala with a total assistance of over Rs 27 crore, and, as a result, the incidence of severely affected palms is reported to have declined significantly  to 24.1 per cent in 1996-97 from 32.4 per cent fifteen years earlier. However, with 80 lakh palms still showing advanced symptoms, the Kerala Government has proposed an acceleration of the programme of cut and replanting. In this context, the Government of Kerala has stated that the present compensation rate of Rs 200 per palm for cutting and re-plantation is too meagre and that this needs to be raised to Rs 500 per tree. In its discussion with scientists from CPCRI, the Commission has been informed that an even higher compensation might be required in those parts of the state where disease incidence is currently low and, therefore, the benefits in terms of stopping the spread of disease by accelerated cutting are very high. However, the Commission was also informed that since the economic losses associated with the root-wilt disease are related to the greater susceptibility of such palms to leaf-rot, it might be more effective to address the latter disease in severely affected areas rather than increasing the subsidy for cutting and replacing root-wilt affected palms in these areas. In this context, CPCRI has reported that it has found an effective and economic method to control leaf rot by cutting and removing the affected spindles and applying fungicide and phorate twice a year. The Commission therefore recommends that the Kerala Government's proposal for Central financial assistance for an accelerated programme of disease control be considered urgently by the Centre but that, while doing so, the economic effectiveness of alternative approaches be fully explored. Further, since pest and disease problem in other coconut growing states have had less attention, it is necessary that CDB and CPCRI should expand their efforts to address the disease and pest problems peculiar to these other states.

 10.       The need to deal with attacks of pests and diseases on coconut plantations with additional financial assistance from the Central and State Governments is essential at the present juncture, as there is an urgent need to consider the future competitiveness of Indian coconut production. As has been discussed at length in earlier reports of the Commission, the price of copra and coconut oil is much higher in India than in international markets, and that this is possible only because currently both copra and coconut oil are on the list of restricted imports. With India having lost its case for continuing with quota restrictions in the Dispute Settlement Mechanism at the World Trade Organisation (WTO), the effects of competition from abroad are now likely to be felt at a pace much more accelerated than anticipated earlier. Failure to accelerate the pace of pest and disease control would otherwise push up the cost of production of coconut, copra and coconut oil and lead to a further widening of the already large existing differentials between their domestic and international prices. The world prices of copra, which averaged at $ 489 per tonne during 1996 declined to $ 434 per tonne in 1997 and to $ 411 per tonne in 1998. The prices have, however, been looking up since the last quarter of 1998 and, the average prices for January-July of the current year were given at $ 484 per tonne. Similar trend is also seen in the world coconut oil prices, which after declining from $ 752 per tonne in 1996 to around $ 658 per tonne during the next two years, have gone up to reach an average of $ 766 per tonne during January-July 1999. Compared to these prices, the domestic prices of both these commodities have been ruling very high. The domestic prices of copra and coconut oil during the current year have been about 80 per cent and 60 per cent higher than their respective international prices, and even the current MSP for copra is about 50 per cent higher than the international price.                                                                            (Table 11 and 12)

 11.       The prospect of competition from much cheaper imports while domestic costs of production increase is already causing much anxiety among coconut farmers. The Commission considers it essential that the government outline a road map to the policy environment and the situation likely to prevail when quota restrictions are finally ended. This is necessary since if the present uncertainty regarding the future continues, there is likely to be a slackening of the effort to improve yields and reduce cost of production precisely when the need is to substantially step up such efforts in order to cope with increased competition. Farmers have less flexibility in the case of a tree crop such as coconut than in the case of field crops, but any neglect of plantations can have prolonged effects, as can the adoption of yield raising measures such as investment in irrigation. In this context, it is necessary to assure farmers that India's current tariff bindings for copra and coconut oil at the WTO are sufficiently high so that no large fall in domestic prices need occur with the withdrawal of quota restrictions, and that any subsequent tariff reduction will also be caliberated in a manner which safeguards farmers from sudden losses. It would also be useful to keep up farmers' morale by stressing India's inherent advantages in terms of superior yields compared to potential competitors and the fact that India's pattern of coconut consumption (with about 60 per cent of nuts being consumed directly in fresh form as edible, pooja or tender nuts) would provide a large naturally protected market to coconut growers even with freer imports of copra and coconut oil. Even in the case of coconut oil, some degree of natural protection exists since imports can be only of refined oil (except possibly of limited amounts from Sri Lanka) and this is unlikely to substitute completely for local production in terms of taste, so that the situation need not worsen very markedly from that which already prevails with the import of palmolein at relatively low rates of import duty and this competing in local markets with coconut oil priced 2.5 times higher. However, since some negative impact on coconut producers of liberalisation of copra and coconut oil imports is inevitable, there is a need not only to minimise these but also to send out positive signals about the concern of government with the situation of coconut farmers currently faced with increased pest attacks and the prospect of increased price competition. Besides tariffication of copra and coconut oil at adequate duty levels, there is an urgent need to increase the existing applied tariff rates on the other edible oils, such as palmolein, whose imports are already under OGL. With the prices of soyabean and sunflower currently ruling below their MSPs as a result of high edible oil imports at low world prices, an upward revision of the tariff to safeguard the interest of the growers of these oilseeds is in any case overdue. This would also have a positive effect on the price of copra and coconut oil. The Commission recommends that the Government announce in advance its plans for tariffication of copra, coconut oil and other coconut products and also adjust upwards the tariff on vegetable oils, particularly palmolein and palm kernel oil, within the bound rates submitted to the WTO.

 12.       Also, since the only viable long-term response to international competition is to reduce the cost of coconut production and increase the value-addition in coconut based products, there is an urgent need to strengthen the capability of the Coconut Development Board which is the nodal agency charged with coconut development and the development of diversified coconut products. Besides augmenting its programmes on pests and diseases, the CDB should seek to accelerate the adoption of practices which promise quick increases in the productivity of coconut plantations. In this context, the Commission has learnt that community irrigation schemes have the potential to double coconut yields within two years at a relatively low investment cost, but that no component for this exists in the CDB's present scheme for Integrated Farming in Coconut Holdings for Productivity Improvement, which is otherwise a proven scheme for long-run productivity increase. Similarly, while the CDB has done creditably in the past to encourage technology development of coconut based products, and now finally the private sector is taking these technologies up for commercial exploitation, the CDB's own resources to facilitate this process remains woefully inadequate. Indeed, it is the Commissions impression that instead of being geared up to meet the emerging challenges, the CDB's critical role as a proactive development agency is today less appreciated within government than earlier, and it is less able, for financial and other reasons, to take new initiatives. This can have an adverse effect on the morale of CDB staff and hinder its effective functioning at a very critical period for India's coconut economy. The Commission recommends, therefore, that the capabilities of the Coconut Development Board be suitably strengthened by appointing a full-time Chairman who is an expert on the subject, by augmenting the Board's ability to provide effective technological and marketing consultancy to the private sector, and by providing it with the flexibility and resources to identify and encourage quick yielding productivity measures while continuing with its existing long-term programmes.

13.       In its Copra Report last year, the Commission had made out a case for exploring the possibilities of extending price support directly to coconuts rather than indirectly through copra. This is relevant for two reasons. First, because while it is true that the prices of copra and coconut generally move in unison except during certain lean months, a remunerative minimum support price offered to copra producers does not always guarantee a corresponding remunerative price to coconut growers. The Commission's scepticism in this regard is strengthened by results of micro-level surveys conducted during 1996-97 by the Agro-Economic Research Centre of the University of Madras in the markets of Trissur and Kozhikode which shows that it is village merchants rather than coconut cultivators who gain most when copra prices rule high. The data received in the Commission from State Governments and other agencies also seem to support this contention. For instance, the estimates provided by the Government of Kerala for processing of copra assumes that 685 nuts are required to produce one quintal of milling copra and that a sum of Rs 420 is required for processing these nuts into copra. Using these estimates, the price of coconut corresponding to the MSP of Rs 3100 per quintal for milling copra works out to be Rs 3.91 per nut. Prices of coconut at Kozhikode were below this level during January and February 1999, although copra prices in the same market ruled well above MSP at that time. If this is the case in an organised market like Kozhikode, it could be rather more rampant in the interior village markets where there are no orderly trading practices, and in any case, the price of copra is irrelevant to producers of coconut in most states other than Kerala, Karnataka and Tamil Nadu. The second reason for exploring the possibility of direct price support to coconut is that the present uncertainties stemming from likely trade policy changes relates mainly to copra whose international prices are not only much lower than in India, but is declining relative to that of other internationally traded coconut products. Since over time, it is necessary to encourage a shift to the production of more value added coconut products, it would be desirable that the producers of these products and the growers of coconut have assurance of stable coconut prices, are shielded from the uncertainties relating to the copra and coconut oil complex. With these considerations in view, the Commission had recommended in its last report that, beginning from the 1999 season, the NAFED should indicate separately for each state and the islands, the price per coconut corresponding to the minimum support price fixed for the season.  The Commission is of the firm view that the minimum support price extended to any agricultural commodity should be able to influence the production decisions of its cultivators. Although the minimum support price for copra has helped to some extent in this respect, a better result could be had if coconut prices could be supported.  Therefore, the Commission reiterates its earlier position and recommends that, (a) as and when the minimum support prices for copra are announced, the Government of India should advise the National Agricultural Co-operative Marketing Federation (NAFED) to work out a corresponding indicative price per nut separately for each state and the islands, and give wide publicity to it through its co-operative net works as well as through the apparatus of the local administrations; (b) the local administrations should assist co-operative institutions to implement these prices in their village markets; and (c) the State Governments of the major coconut producing regions may explore the possibility of model contracts based on these indicative prices between coconut processing units and the growers of coconut around their areas of operation. 

14.       The remunerativeness or otherwise of the prices received by the coconut producer has to be judged from his cost of production per unit of raw nut. The Commission's main source of cost data is the Comprehensive Scheme for Studying the Cost of Production of Principal Crops in India. Even though coconut was included in the Comprehensive Scheme since the Eighth Five Year Plan, so far the Commission has not received the cost data for coconut from this source. The Commission has therefore to rely on the estimates provided by the State Governments, Coconut Development Board and the NAFED. This year the Commission has received estimates of cost of production from CDB, NAFED, and the State Governments of Kerala and Karnataka. The establishment cost per hectare of  coconut  plantation reported are Rs 178306 by Kerala, Rs 98156 by Karnataka, Rs 148229 by CDB and Rs 134760 by NAFED. The interest cost on these at the rate of 10.09 per  cent for Kerala and 14 per cent in respect of others, is worked out at Rs 13741 by Kerala, Rs 17991 by Karnataka, Rs 20752 by CDB and Rs 18866 by NAFED.  The maintenance cost in these estimates is given at Rs 15680, Rs 12665, Rs 19275 and Rs 13654 respectively. On the basis of these details, the cost of production reported are Rs 5.38, Rs 3.52, Rs 4.57 and Rs 3.72 per nut. As usual, the Kerala government estimate is much higher than the others mainly because the establishment period is considered to be ten years, as against seven years by the others, and because the yield of mature bearing palms is taken to be the state average yield of 6264 nuts per hectare, which includes in its denominator immature and senile palms also. Also, interestingly, while Karnataka has reported the same cost as last year, and Kerala has reported a cost only 3.7 per cent higher, the CDB cost estimate for this year is 15.7 per cent higher than that reported last year because not only has a larger escalation of input prices been assumed but also conceptual changes made. In any case, as the Commission has pointed out earlier, the methodology of these estimates require revision so as to consider prospective yields and a discounting rate adjusted for likely future price increases. Assuming all the other figures from the respective estimates submitted, but using a real interest rate of 9 per cent and a prospective  yield of 9000 per hectare, the cost of production per nut works out to Rs 3.50, Rs 2.39, Rs 3.62 and Rs 2.86 respectively for Kerala, Karnataka, CDB and NAFED.            (Tables 13 and 14) 

15.       An examination of the break-up of variable costs, shows that human labour, manure and fertilisers account for nearly 90 per cent of the cost of cultivation, with the share of human labour alone being around 45 per cent. On the basis of the growth in the CPIAL index for Kerala, the largest coconut producer in the country, and past trends in real wages, the cost on account of wages is estimated to increase by about 8 per cent. Between October 1998 and September 1999, the fertiliser and pesticide prices have increased by 2.37 and 3.08 per cent respectively. As regards components of irrigation, the WPI for electricity has increased by 6.91 per cent, that of non-electrical machinery by 1.4 per cent, of lubricants by 3.77 per cent, while that of diesel oil has come down by 0.73 per cent. The prices of High Speed Diesel Oil have, however, been considerably increased by almost 35 per cent in the first week of October. Even taking this into account, and considering the weights involved, the input costs of production per nut are likely to increase by about 5 per cent. Applying this to last year's nut price of Rs 3.91 in Kerala, corresponding to the MSP of copra fixed, gives a nut price equivalent of Rs 4.11 if the MSP is increased by the same rate as the estimated cost of production. It may be noticed that this would give a margin of over 13 per cent above the highest cost of production derived by the Commission in the last sentence of the previous paragraph from the cost estimates made available this year. Such a nominal increase in the MSP for copra should therefore be quite adequate if this properly filters down to the coconut grower who obtains normal yield.  A moderate increase in minimum support price is dictated also by considerations of international competition. This may, however, prove inadequate to cover the costs in severely pest and disease affected gardens, but, as discussed earlier, non-price efforts are more appropriate to deal with these problems and the non-price recommendations made in this report should be seen in this light.

16.        Thus, having regard to the production conditions prevailing for coconut cultivation, its domestic and international prices, the movements in the prices of major inputs, and the anticipated level of the average cost of production per raw nut, the Commission recommends that for the 2000 season, the minimum support price be fixed for the fair average quality of milling copra at Rs 3250 per quintal and of ball copra at Rs 3500 per quintal.

  

                                                           (ABHIJIT SEN)

  

            (M.S. BHATIA)                                                                   (Y.V. KRISHNA RAO)           

  

            (G.S. BRAR)                                                                                   (R.G. SAXENA)           

                                                                (S. K. ROY)

 

November 8, 1999.