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R. Balaji

CHENNAI, Feb. 4

S&S Industries and Enterprises Ltd is exiting oil palm operations and its licensed area in Tamil Nadu is being reallocated to Cauvery Oil Palm Ltd, according to reliable sources.

When contacted by Business Line, the Managing Director of S&S Industries, Mr A.R. Santhanakrishnan, said the company had decided to withdraw from oil palm as the policy environment was not conducive to viable operations. The company was unable to absorb the losses from procuring the oil palm fresh fruit bunches from the farmers, and had decided to exit this area of operations. By `mutual consent' the company's license area for procurement of oil palm in Thanjavur district is to be reallocated by the Tamil Nadu Government to Cauvery Oil Palm Ltd, he said. The company was exiting oil palm in Andhra Pradesh and Karnataka also, he said.

According to reliable sources, Cauvery Oil Palm Ltd, which at present operates in Tiruchi district, has agreed to take up procurement of fresh fruit bunches harvested from oil palm in Thanjavur district. The State Government had in-principle decided to reallocate the area, and a formal decision was expected within a few days, said sources.

Cauvery Oil Palm is a part of the Bharat Technologies group headed by Dr V. Krishnamurthy, who at various times has headed Maruti Udyog, SAIL and BHEL.

Meanwhile, a Rs 4.5-crore oil palm processing unit with a capacity to process 2.5 tonne fresh fruit bunches (FFBs) per hour is to be established in Ariyalur district, Tamil Nadu to produce palm oil. The pilot unit is to be set up by Cauvery Oil Palm with assistance from the State Government and the Centre.

The State Government has identified 3.5 ha land that is to be purchased by Cauvery Oil Palm, sources said.

Industry sources said this move left Cauvery Oil Palm the sole player in oil palm procurement and processing in Tamil Nadu. S&S was the pioneer in entering oil palm cultivation and processing in the State in the mid-1990s. Cauvery Oil Palm and two other corporates also ventured into this activity.

The State Government had identified oil palm as a thrust area and had modelled the development along the lines of sugarcane. Command areas with potential for the cultivation of oil palm had been identified, farmers were to cultivate and supply the FFBs to licensed corporates who had to put up processing units in the area to produce palm oil. The price of the FFBs was fixed by tripartite discussions involving the farmers, corporates and the Government. The State Government disbursed about Rs 20,000 per hectare during the first four years of oil palm cultivation. According to sources, the two corporates who had taken up the activity, Cauvery Oil Palm and S&S Industries, have invested about Rs 10 crore each. However, according to sources, the plans ran into rough weather when the corporates could not commit funds to set up the capital-intensive processing units (then estimated at more than Rs 1 crore for a processing capacity of one tonne per hour).

The corporates had contended that pending arrivals of substantial quantities of FFBs from the farms, they could not set up processing units. With the farmers beginning to harvest FFBs, the corporates had been left with no option but to procure the produce at the agreed price of Rs 2200 per tonne. These were then sent to processing units in Andhra Pradesh or simply discarded. The companies had lost Rs 1750 per tonne on every tonne of FFB procured, according to industry estimates.

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