High taxes lead to closure of soya processing units in MP

The soybean industry in MP is suffering low margins apart from lop-sided taxes. Of the 70-odd soybean processing units, about 45 are surviving and some of them are on the verge of closure.

The soybean industry in the state is reeling from unused capacity, low margins and lop-sided taxes. Of the 70-odd soybean processing units that once lined the Agra-Mumbai road, about 45 are surviving, some of them on the verge of closure. Moreover, more than half their capacity remains unused.

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Crushing soybean generates 18% oil and 82% oil meal, which is used as poultry and cattle feed. High soybean prices, coupled with low refined oil prices and falling soya meal exports threaten to make soybean crushing unfeasible and increase the risk of adulteration of refined soya oil.

"The industry is reeling from low margins, unused capacity, and high taxes that results in lack of a level playing field," Soybean Processors' Association of India spokesperson Rajesh Agarwal said.

As against a processing capacity of about 220 lakh tonnes, India's soybean crop available at any given point of time for oil extraction is about 100 lakh tonnes, according to industry estimates. MP alone can process 125 lakh tonnes of soybean, which is more than the total production in the country.

In the 1980s and 1990s, a spurt in the soybean production and tax incentives by the Madhya Pradesh government lured many industrialists into soya processing, leading to excess capacity. However, the processing units started facing closures once the incentives lapsed.

Some units shifted base to Maharashtra because of tax advantages and an increase in soya production. Over the last few years, ownership of many old soya processing units in the state has changed hands with big-ticket companies taking over the small units.

In the past two years, Indian exporters have lost some of their key markets for soya meal because of uncompetitive, high soybean prices. Major clients including Japan and Iran have turned to Argentina and Brazil due to big difference in prices.

Industry experts say over 15 lakh tonnes of soybean will be left uncrushed in the current season, resulting in a huge carry forward to the next season. This will drag prices down and hurt farmers, besides making crushing unfeasible for plants across the country.

While refined soya oil prices have firmed up in the market in the past few days, there is still a long way to go before operations turn profitable for the industry.