Kerala: The pricey state of coconut oil

In Kerala, the humble coconut is an exalted commodity — life literally revolves around this hard nut. Its brown hair is the basis of a thriving coir industry, its shell is repurposed in umpteen ways, its water makes a refreshing drink, its flesh is milked or grated to make delicious poriyals or fragrant curries and its oil is the preferred cooking medium across the state.

That might explain why, in a recent incident, a thief broke into a shop, ignored a stack of cash and instead skipped out with a more precious haul — 30 bottles of virgin coconut oil.

The break-in occurred weeks ahead of Onam, one of Kerala’s most important festivals, in the Kochi suburb of Aluva. The thief, presumably male, tried to drill through the floor of the grocery store, but having failed, broke open the lock on the door and gained entry. He seems to have been quite clear about what he wanted — the premium coconut oil whose price has recently skyrocketed, straining household budgets and causing much heartburn among consumers.

Despite widespread coverage of the unusual theft in local media, no formal complaint was lodged by the shop owner Ayoob Puthanpurayi. Reporting that CCTV footage revealed the thief inside his shop, Ayoob estimated the loss from the stolen oil at over Rs 18,000, much more than the Rs 5,000 in the till, which the thief left untouched. The Aluva police said they would launch an investigation only if they received a formal complaint.

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In the run up to Onam (4 September), coconut oil prices have almost doubled. A one-litre bottle usually available for around Rs 300 is now going for anywhere between Rs 500–600. The price varies according to the type of oil, location (cheaper or costlier depending upon local market conditions), and the prevailing price of copra (dried coconut) from which the oil is extracted. Typically, oil from the coconuts of neighbouring Tamil Nadu are cheaper, while oil pressed from homegrown trees are prized for their flavour and fragrance.

Simple economics explains it — a surge in demand before Onam and a shortage of supply suddenly had everyone talking about the price of coconut oil. As often happens in India’s most literate state, the topic soon entered news headlines and political debates. The Left Front government — no doubt aware that a runaway increase in the price of this ‘liquid gold’ meant running a risk — cooled tempers by announcing the sale of subsidised oil in government shops.

The impact is not limited to households. The ayurvedic medicine sector — with an annual turnover of about Rs 4,000 crore — has seen its margins shot to pieces. This despite hiking prices of coconut oil-based drugs by over 20 per cent to keep up with the rising price of coconut oil. There are over 800 manufacturers, big and small, of ayurvedic medicines in Kerala.

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D. Ramanathan of the Ayurvedic Medicine Manufacturers of India says that the industry consumes about 12,000 tonnes of coconut oil a year; this does not include soaps manufactured from coconut oil. The price has rarely been more than Rs 200 a litre at any given time — until now.

Another reason for prices to have gone through the roof is what economists call inelastic demand. Despite high prices, people haven’t switched to cheaper oils. Now this economic phenomenon has a cultural, or rather a culinary, connection: Malayalis are sold on the taste of coconut oil. There’s no way they’re going to switch to any other oil, come what may.

A 40 per cent reduction in supply has contributed to the price surge. Kerala coconut production has been hit by pests and climatic changes, and with copra imports from the Coimbatore region of Tamil Nadu impacted by rain (which affects the quality of the crop), prices were bound to shoot up. It seems there’s also an international angle: increased demand from China has contributed to the spike.

That’s the bad news. The good news is that prices are cooling down with increased supply coming in from other states, especially Tamil Nadu, to match increased demand before Onam.