Govt. to crack the hard nut of too many institutions

• Coconut Cultivation and Allied Industries Development Authority to be set up integrating four State agencies serving the sector
• Govt. says existing institutions have failed to provide required level of service due to lack of effective relationship between them
• Coconut production in 2019 grew by 17.6% to 3.08 billion nuts
• In first eight months of 2020, crop declined by 11% to 1.8 b nuts

The Government is to address the thorny issue of too many, and often overlapping, institutions in the coconut sector by setting up a single organisation.

The Cabinet this week approved the moves to amend the Coconut Development Act, to combine all Government institutions regulating the coconut sector.

The Coconut Cultivation Board, the Coconut Development Authority and the Coconut Research Institute have been established under the Coconut Development Act No. 46 of 1971 for the fields of coconut cultivation, industry and research. In addition, the Kapruka Fund Management Board has been established by the Kapruka Fund Act No. 31 of 2005. 

The Government said that although these institutions have been established to regulate the coconut sector and coordinate all related activities, they have failed to provide the required level of service at present due to a lack of an effective relationship between them.

Therefore, it has been decided to combine the four companies into a single entity, taking into account the duplication of certain functions performed by them, the need for clients to obtain their services from several institutions, and the significant cost incurred in maintaining those institutions. 

As a solution, the Cabinet of Ministers has approved the proposal presented by Minister of Plantation to amend the Coconut Development Act No. 46 of 1971, to allow the establishment of a new institution

called the “Coconut Cultivation and Allied Industries Development Authority”.

The country’s coconut production in 2019 was 3.08 billion nuts, up by 17.6% over the output in 2018. The increase in output was attributed to the lagged effect of favourable rainfall in 2018 reported in the coconut triangle and other coconut growing areas. 

Whilst 2020 full year data is pending, in the first eight months of 2020, total coconut production declined by 11.3% during the period as compared to the 25.3% growth recorded during the same period in 2019. Output fell to 1.8 billion nuts from 2.1 billion nuts recorded in the corresponding period of 2019. 

The Central Bank attributed the decline in production to the lagged effect of dry weather conditions that prevailed during mid-2019 in the coconut triangle and other coconut growing areas. Owing to the combined effect of decreased nut production and supply side disturbances related to the COVID-19 pandemic, the production and export of coconut-based products declined considerably in the first eight

months of 2020.

Desiccated coconut (DC) production declined by 43.1% to 17,558 metric tons during the period from January to August 2020, from 30,868 metric tons recorded during the same period in 2019. Coconut oil output recorded a considerable decline by 60.4% to 13,504 metric tons, mainly due to factory closures and mobility restrictions imposed to curb the COVID-19 outbreak. 

Virgin coconut oil production increased by 2.6% to 9,062 metric tons.

The Central Bank said importation of coconut oil increased significantly to 30,575 metric tons during the period from January to August 2020, from 2,148 metric tons during the same period in 2019. 

In the wake of the coconut oil shortage in the domestic market, the Government revised the Special Commodity Levy (SCL) on coconut oil, virgin coconut oil and palm oil imports several times during the second quarter of the year. On each occasion, the SCL on coconut oil and virgin coconut oil imports was maintained at a lower level than the SCL imposed on palm oil, encouraging coconut oil and virgin coconut oil imports to the country. 

Moreover, copra exports and fresh nut exports also declined by 54.0% and 7.1%, respectively, during the period under review. In contrast, coconut cream and coconut milk production, which utilises around 12.2% of the total nut production, recorded a 26.2% increase in the period from January to August 2020 compared to the corresponding period in the previous year. 

During the period from January to August 2020, the supply shortfall in coconut production resulted in a sharp increase in the price of coconuts and coconut-based products. Accordingly, the average auction price of a coconut at the Colombo Coconut Auction increased to Rs. 48.18 per nut during the period from January to August 2020, from Rs. 25.86 per nut reported in the same period in 2019. The average retail price of a coconut increased by 39.4% to Rs. 70.20 per nut compared to the corresponding period in 2019. Meanwhile, the average price increased significantly to Rs. 83.87 per nut during April 2020 as a result of disruptions to the coconut supply chain. However, by the end of August 2020, the price declined to around Rs. 72.28 per nut. 

Considering the high retail prices of coconuts, the Government imposed maximum retail prices for coconuts in September 2020, based on the size of the nut measured in terms of its circumference. Meanwhile, the average coconut oil price also increased significantly by 32.3%, from Rs. 260.42 per 750 ml bottle during the period from January to August 2019 to Rs. 344.61 per 750 ml bottle during the corresponding period in 2020.

The average local market price of desiccated coconut increased to Rs. 407.17 per kilo in the period from January to August 2020 from Rs. 241.52 per kilo during the same period in 2019.

Earlier this month, Cabinet pre-emptively gave approval for the Plantations Ministry to import frozen coconut kernels to support the industry, given production is expected to see a shortfall of 250 million nuts this year.

Cabinet gave approval to a Cabinet paper submitted by Plantations Minister Dr. Ramesh Pathirana to begin kernel imports as per a decision taken in 2017. Under the earlier Cabinet decision, imports can be made if coconut production is below 400 million nuts for four consecutive months. 

Last year 2,542 metric tons of coconut kernel were imported during a period of eight months, the Government Information Department said. 

Approval of the Cabinet of Ministers was granted on 12 December 2017 for the import of coconut kernels subject to certain conditions as a result of local coconut production supply being insufficient for industries related to coconut kernel.

“Therefore, the Cabinet of Ministers has decided to grant their consent for the resolution submitted by the Minister of Plantations for taking necessary measures for importing coconut kernel for the local coconut kernel-related industries, under the same conditions applicable at the previous instance if bi-monthly coconut production is below the margin of 400 million nuts within four months continuously,” the department statement said. 

In December the Government said it would import 39 metric tons (MT) of sliced dry coconut through the State-run B.C.C. Corporation, over a period of three months, to encourage local coconut oil producers.  

Under the proposal 13 MT of sliced dry coconut would be imported each month.

According to the Government, the Consumer Affairs Authority (CAA) has found out that the coconut oil imported into the country contains nearly 70% of non-coconut oils. Due to the insufficient coconut production in the country, it has become a challenge for nearly 500 coconut and allied factories to keep functioning.