Aditi Joshi
| 38 views | 5 min read
A staple in Indian kitchens, mustard oil holds a significant place in the rural economy, specially in northern and eastern states. It is deeply embedded in the culture, cuisine and agriculture of India. Let’s explore the economics behind mustard oil production in Assam, from its cultivation to market trends, challenges and the factors shaping the industry.
Mustard, a winter crop, is primarily cultivated in states like Rajasthan, Haryana, Uttar Pradesh, and Madhya Pradesh which accounts for 80% of the country’s production. In 2019-20, Assam accounted for around 2% of the national production. With favorable climatic conditions, Assam’s mustard production has seen steady growth.
Cost of cultivation: The average cost of mustard cultivation includes inputs like seeds, fertilizers, labor, and irrigation.
Yield and productivity: The national average yield of mustard in 2019-20 was around 1.33 MT/Ha whereas the average yield in Assam was only 0.617 MT/Ha which is less than half the national average. The productivity levels are still below national standards due to factors like fragmented landholdings, occurrences of flood and water scarcity, non-availability of fertilizers and chemicals during peak seasons at affordable prices. Read more on challenges Indian farmers face.
The production of mustard oil involves these primary processes -
Seed drying: The mustard seeds are dried in the sun to remove any water that could deteriorate the oil extraction process. Seeds cleaning: The dried mustard seeds are then cleaned, whereby all the dirt and foreignobjects are removed from the mustard seeds.
Seeds heating: The mustard seeds are then heated before oil pressing starts. Heating the seeds increases the quantity of the yield. The process also increases availability of protein in the by-product seed cake that is used for making animal feeds.
Oil extraction: Well prepared mustard seeds are immediately fed into the mustard oil press machine, where the seeds are crushed and pressed for up to one hour or more depending on the quantity to produce approximately 35% oil.
Oil purification: The final step involves filtering the extracted oil to remove impurities from the oil before the oil is bottled and stored.
The efficiency of oil extraction affects the final economic output. Currently, around 35-40% of mustard seed weight is oil, while the rest is used for mustard cake (which has value in livestock feed). Investments in modernizing processing units could boost efficiency and profitability.
Distribution and marketing plays an important role in deciding the income of the oil production unit. Following factors influence the demand and supply of mustard oil producers in Assam -
High local demand - There is high demand for mustard oil in Assam.Thus local supply of the oil reduces the cost of transportation and also is a step towards self-sufficiency in the state.
Price trends - The MSP on Mustard is high in the state. Thus it becomes viable for the mustard oil producers to buy Mustard in bulk.
Marketing pathways - With the formation of FPOs and increase in accessibility to e-commerce, there are multiple marketing channels that have opened up.
The produces will be distributed in two modes - ● From wholesaler to retailer to consumer. ● The process will be directly distributed to the customers through e-marketing.
Working Capital needed - ₹ 5,00,000
Tenure - 12 months
Interest Rate - 9% (Mustard crop is procured only once a year all at once approx 9 tonnes.This working capital is also spent for packaging cost, electricity cost, labour cost, marketing cost and miscellaneous costs)
Income for the year - (assuming the production meets the targets)
From selling mustard oil (5787 ltr x Rs.130/ltr) - ₹ 7,52,400 From selling mustard oil cake (7,357kg x ₹28/kg) - ₹ 2,06,000 Total Income - ₹9,58,400
Annual Profit - ₹ 4,58,400 Loan interest - (-) ₹ 45,000 Annual Net profit - ₹ 4,13,400
Sustainability and climate change - Untimely and heavy rains in Assam or water scarcity in some areas affects the crop production which occurs only once a year in the winter season. Mustard cultivation is water-efficient and has a smaller carbon footprint compared to other crops. As the conversation around sustainable agriculture grows, mustard could emerge as a more eco-friendly option in India’s edible oil sector
Need for timely Credit - The oil producers need to buy the crop in bulk due to the annual crop production. Thus they require timely and affordable credit to do so. The quality and the quantity of production also needs advanced equipment which also requires support through credit.
Mustard oil remains an integral part of India’s agricultural and economic landscape. By focusing on increasing productivity, improving processing technologies, and expanding market opportunities, India can continue to leverage mustard oil’s cultural and economic value.
Rang De has been supporting Farmer Producer Companies in Assam that produce mustard oil and also farmers across India who harvest mustard crops. Timely and affordable credit from Rang De social investors has proved to be life-changing for these farmers and entrepreneurs. It has helped them increase their production, yield and earn more profits.
To invest in farmers and entrepreneurs of Assam, visit rangde.in/assam today - create impact + get repaid with interest
Suggested reads : Understanding FPOs, Fish Farming in Assam
