Veg oil cos race to ramp up capacity

The country’s oilseeds and vegetable oil industry is undergoing a consolidation and expansion phase as big players try to build capacity to lower operational costs and better margins. Firms like Adani Enterprises, Ruchi Soya Industries, unlisted Bhaskar Exxoils, KS Oils and Gokul Refoils & Solvent are ramping up crushing and refining capacity through green-field projects or buyouts. “Consolidation is happening due to economies of scale and also because big players have a huge distribution network across India for which they need units near the market,” Ashok Sethia, president, Solvent Extractors' Association of India, said. Big players are also capable of branding, which smaller players can't. “I think small players can't match cost of operations, logistics with big players. In coming days they have to merge with big players. It is difficult for smaller players to sustain individually,” said Bhaskars Exxoils’ chairman Ramesh Agarwal. “Bhaskar Exxoils Ltd is planning to expand refining capacity by 67% to 2,000 tonne per day in financial year 2010,” Agarwal said earlier this week. “County’s edible oil demand, pegged at about 13 million tonne to 13.5 million tonne, is rising at an annual clip of 5-6% and more than half that demand is met through imports,” Agarwal said. According to Central Organisation for Oil Industry and Trade country’s over 1,000 refining units have an annual capacity of about 12.2 million tonne. Besides, the country also has about 1,50,000 crushing units, big and small, however, many smaller units have closed down. The total current operational capacity is about 20-25 million tonne. “Big players are also getting incentives in some states, like West Bengal where government gives sales tax incentive to set up bigger capacities,” Sethia said.