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A narrative report

On
Value Chain Analysis
of
Mentha farming and processing Cluster
Haidergarh, Barabanki, UP

By
Satyendra Nath Pandey
Content

Introduction........................................................................................................................ 1

Objective of the analysis .................................................................................................... 2

Study Methodology............................................................................................................ 2

Value chain and value addition .......................................................................................... 3

Mentha Farming ............................................................................................................. 3


1. Seeds and Fertilizers ............................................................................................. 3
2. Farming and harvesting......................................................................................... 4
3. Agriculture economics of Mentha cultivation (comparative economics with other
crops in the same field)................................................................................................ 4
Mentha processing and extraction of essential oil ........................................................... 7
1. Processing and extraction of essential oil.............................................................. 7
2. Production economics of mentha processing......................................................... 7
Mentha Trading .............................................................................................................. 8
1. Trading in local market with petty procurers (from farmers to Haidergrh market) 8
2. Trading with whole sale traders and crystal manufacturer..................................... 9
3. Export of Mentha essential oil .............................................................................. 9
4. Trading economics on various layers .................................................................. 10
There are three layers of petty procurers up to the Haidergarh market. These petty
procurers operate their trading on a flat margin of Rs 5/-. ............................................. 10
Value chain Diagram .................................................................................................... 13
Inferences......................................................................................................................... 14

2
Introduction
Mentha oil is an important ingredient used in various products of pharmaceuticals and cosmetic
industries. Menthol crystals are the basic ingredient for toothpaste, mouth fresheners, pharmaceuticals,
aurvedic and Unani medicines, chewing tobacco, pan masala, pain balm, confectioneries, cosmetics, and
fragrance industries etc. The crystals of mentha are produced from crystallization process of mentha
essential oil which is abstracted through distillation process of mentha plant. The mentha crystals and
mentha essential oil have high demand in the national and international market.

India is the highest producer and exporter of mentha essential oil. The oil is exported to Argentina, Brazil,
France, Germany, Japan, and the UK. India produces around 80% of the entire world production of
mentha essential oil. In India UP is the major producer of mentha essential oil and it contributes 90% of
the total Indian production. Simultaneously in UP, Barabanki and its surrounding districts produces
around 60% of entire production of India.

The district Barabanki comprises trough 17 blocks and 2096 villages with 30 lakh of the total population.
The head quarter of the district is situated 30 km east from the Lucknow, state capital of the UP. The
district has internationally recognized for the mentha farming and cultivation. According to an estimates
the district Barabanki and its surrounding districts (Sitapur, Gonda, Faizabad & Bahraich) contributes
60% in entire mentha production of India1. Another 30% is also grown in other districts of UP i.e.
Smbhal, Chandausi, Moradabad, Bareilly, Rampur, and Bilaspur. Rest 10% of peppermint is grown in
Punjab, Haryana, Chhattisgarh, MP, Bihar and Rajsthan. India is the biggest producer of mentha essential
oil in the world followed by China and it produces 14,000 ton mentha essential oil out of 19,000 ton of
the production of the entire world. Thus Barabanki has major contribution in production of essential oil in
the world.

Haidergarh is one block of the district and also known for mentha farming in large volume. The
cultivation of mentha crop was introduced around 1986 which has seen now as the major cash crop of the
district and block and simultaneously as the farming of the mentha was increased the number of
processing and distillation units also increased in the district. According to an estimate around 4000
processing and distillation units are in existence in the district.2 Peppermint plants are used for the
abstraction of the essential oil which is used in the pharmaceuticals and cosmetics industries. The mentha
crystal, which is the product of menthe essential oil, is used as raw material in the pharmaceuticals and
cosmetic industries. Though mentha is grown in all 17 blocks of the district yet Masauli, Haidergarh,
Barabanki are the major producers’ blocks of mentha essential oil and have many numbers of processing
and distillation units of mentha are in large volume in these blocks.

The farmers grow the mentha crop as opportunity cost. They sow it after harvesting of wheat and harvest
it before sowing the paddy. They grow the crop on traditional pattern and no business development
service provider is available in the cluster that can provide support to the farmers in their farming and
trading practices. Very randomly the farmers get support from the local traders, middlemen and some
government officials based at Lucknow and Haidergarh i.e. CIMAP, Lucknow; KVK Haidergarh etc. But
these BDS providers do not offer entire package to the farmers. Thus, there is a growing need of
establishing a resource center which can provide a full package to the farmers and entrepreneurs.

1
According to a survey conducted by Richardson Hindustan Ltd
2
Assumption based on focused group discussion conducted with owner of processing units and farmers at Ismailpur
1
Objective of the analysis
Objective of this analysis is to analyse entire value chain of Mentha Farming and Processing Cluster
Haidergarh, district Barabanki.

Study Methodology

For this analysis, primary and secondary source of information were used. The detail of the mythology is
as follow:
1. Primary information: Interaction held with the following
 3 retailers based at Haidergarh
 2 FGD with farmers in the cluster
 4 in-depth interview of entrepreneurs
 2 interaction with local trader at Haidergarh
 1 retailer (layer 2) based at Haidergarh
 1 functionary of Vamshi Chemical Ltd, based at procurement centre of the company at
Haidergarh
 2 interaction with wholesale trader and owner of crystal formation unit based at Barabanki

2. Secondary information: The secondary information was explored and referred from following
sources:

 Interaction with DDM NABARD, Barabanki


 1 Interaction with functionary CIMAP, Lucknow
 Interaction with functionary YUVA
 Journals, PLP NABARD, Internet etc

2
Value chain and value addition
From farmers to Haidergarh there are three types of traders. Some traders are from farmers groups who
collect the abstracted essential oils from farmers of nearby areas on a predecided selling point and sell it
at Haidergarh. Some traders work as vendor and collect oil from farmers’ home and sell it at Haidergarh
market. Third type of traders is those, who work as procurement agent for traders at Haidergarh and they
work on a set commission pattern.
In Hiadergarh small and big retailer both are operates their business. The big retailers are that, who deal
with wholesale traders from Barabanki and have per day procuring capacity of more than one drum (180
liter peppermint essential oil) and small retailers are who, that has less than 180 essential oil per day
procurement capacity. These small retailers sell their essential oil to the big retailer at Haidergarh. At
Haidergarh Vamshi Chemical Ltd has also established its procurement center.

Pricing
The price are decided on the basis of congealing point (CP) testing retailers and petty procurers while the
big traders and crystal manufacturing units decides the rates on the basis of Gas Liquid Chromatography
(GLC) testing. These two methods are fro quality checkup. The pricing procedure is controlled by MCX
(Multi Commodity Exchange) Mumbai. The whole sale trader has received license for online trading and
they use the MCX website to update themselves of price. The rates of the oil are fluctuated per hour basis.
The wholesalers tell the recent price (Per hour basis) to the retailer for procurement of essential oil.
Transportation
Good transportation facilities are available in this area. The mode of transportation is depend on quantity
of procure oil. How ever the big traders use trucks for transportation while the small traders use public
transports to take the oil from one place to another place.
Peak season
The peak season for the trading of essential oil is from May to November. Beyond this time the oil come
in the market in low volume. The farmers save it for emergency and crises time who sell it beyond the
season but it looks very rarely. The rate also goes down beyond the peak season.
Licensing and tax
At farmers level harvesting, abstracting and selling of essential oil is license free. But for trading, license
is required and the traders have to get registered in excise department and Mandi Samiti. 3% of entire
procurement is paid to the excise department and 2.5% is paid to the Mandi samiti. However the mandi
tax is under litigation.
Financing
The local traders invest their won money for trading. Since the license is required for trading and a huge
amount needs for its trading operation (Rs 50,000/- to 80,000/- for 1 Q of essential oil per day), the
traders invest their own money to save the taxes.

Farmers use their personal savings for farming. Sometimes local money lenders and traders of mentha
essential oil provide them credit for their farming activities.

The detail of different layers is as follow:

Mentha Farming

1. Seeds and Fertilizers

3
During the season many traders come from outside at Haidergarh to sell mentha roots which roots are
used as the seed in mentha cultivation. They take mentha roots on truck for sell in the local market
and most of the farmers buy the roots for seed from these traders. However many farmers preserve
seeds from their past production and use it as seed for their forthcoming crops. Sometimes, some
progressive farmers procure a better variety of seed from CIMAP, Lucknow but it is seen very rarely.
The rates of mentha roots are normally vary from Rs15/kg to Rs 20/kg in the local market.

Farmers use fertilizers as their normal practices. They buy fertilizers from local nearby shops and
market. Some big farmers who are the members of cooperative society buy the fertilizers from
cooperative society. They also use cow and buffalo dung as manure in their field.

2. Farming and harvesting

In Haidergarh block, the farmers sow the mentha in the mid of March after harvesting wheat crop.
The peppermint crop get maturity in 4 months for optimum production and this goes to the mid of
July. Due to threat of water logging after rain the farmers are compelled to harvest peppermint in
three months of cycle without getting maturity. This type of crops also takes more time for
processing. Mostly farmers harvest mentha crop after rainy season due to late sown. Due to water
logging the oil content goes to the earth with water and the production of essential oil affected. The
wet plants take more time in processing also.

3. Agriculture economics of Mentha cultivation (comparative economics with other crops in the
same field)

Mentha is high value cash crop which has a huge margin in its farming and trading. The farmers are
aware about the farming pattern of mentha in Barabanki. In local and out side market there is high
demand of mentha essential oil. The oil is used in various industries i.e. pharmaceuticals, cosmetics
and FMCG industries as basic ingredients of toothpaste, mouth fresheners, pharmaceuticals, aurvedic
and Unani medicines, chewing tobacco, pan masala, pain balm, confectioneries, cosmetics, and
fragrance industries etc.

There is a margin on mentha cultivation in comparison to other crops. In mentha the margin between
input and output is 82% in 1 the crop sown in 1 acre while margin in input and output in paddy,
mustered and wheat is 30%, 46% and 15% respectively. In one acre field the margin between returns
and input for mentha is Rs 19025/- while the margin between return and input for paddy, mustered
and wheat is Rs 4150/-, Rs 3750- and Rs 1540 respectively.

Also there is a huge opportunity to increase profit in mentha cultivation by proper intervention. The
detail of Agri- economics of mentha with comparison data and chart with other crops are as follow:

4
a) Agriculture Economics (inputs, Costs and activity dates-The crop sown in the same area of Mentha for the entire year) of CURRENT year
July 2007 to June 2008
SN Crop Name Area Land Seeds/Sowing Fertilizer Pestici Irrigation Labour Harvestin Total
in Prep Rs. de g (In Rs)
(Acre Cost (Rs) Month
) in Rs Month Qty Cost nos/hours Rs. man Rs.
kg (Rs) days
1 Mentha 1 600 April 40 800 850 55 5 times (25 hr) 2000 20 100 July 4405
(peppermint)

2 Paddy 1 490 July 7 70 260 80 7 times (35 hrs) 2800 25 1250 Oct 4950

3 Mustered 1 700 Oct 3 90 455 100 2 times (10 hrs) 800 2 100 March 2245

4 Wheat 1 800 Nov 50 500 800 160 3 times (15 hrs) 1200 10 500 April 3960

b) Returns from Agriculture

SN Crop Name Processing Cost (Rs) Total Input Produce (B) Net margin
Cost (A) (B-A)
Quantity @Rs. Value (B)Rs. Rs.
1 Mentha (peppermint) 770 5175 44 liter 550 24200 19025
2 Paddy 4950 13 Q 700 9100 4150
3 Mustered 2245 3Q 2000 6000 3755
4 Wheat 500 4460 6Q 1000 6000 1540

5
Co mparativ e C hart o f A gri e conomics o f v arious crops s o wn in
the s ame are s
90% 82%
80% 73%
% of input, output and net margin

70% 65% 65%


60% 57%
50% 46% 43%
40% 35%
30% 27%
30%
20% 18% 15%
10%
0%
Mentha P addy Mustored W heat
(pippermint)
T o t al in p ut co st T o t al o ut p ut N et m argin

Comparative chart of agri economics of various crop


sown in the same area

25000 24200

20000 19025
Amount spent in Rs

15000

10000 9100

5175 6000 6000


4950 4150 4460
5000 3755
2245 1540
0
Mentha Paddy Mustored Wheat
(pippermint)

Total input cost Total output Net margin

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Mentha processing and extraction of essential oil

1. Processing and extraction of essential oil

The mentha plants get processed in the processing unit for essential oil extraction. To obtain essential
oil, fresh or semi dried mentha is packed in distillation tank uniformly. The steam that comes out of
the tank is then passed through a condenser receiving the steam, carrying the oil extracted from the
herbage in the tank is kept constantly cool by circulating cold water. The condensed oil and water
mixture is collected in a receiver. The oil floats on the surface of the water in the receiver where oil is
skimmed off and collected.
Usually the straw of the mentha plant is used as fire wood for the distillation and abstraction of
essential oil. If necessary, the entrepreneurs buy the wood for firework from market. The cost of fire
wood and labour to keep burn the broiler is arranged and borne by the farmers.
The owner of the processing units do only job work and received Rs 140/ to Rs150/- for the
distillation of one tank of mentha. In the distillation of one tank of mentha around 4 Quintal mentha
plant is required which produce around 10 liters of essential oil. Generally 6 to 8 hours are required
for the distillation of one cycle of mentha. However the time for the distillation of one cycle of
mentha and the quantity of produce in terms of essential oil is vary on the quality and maturity of
mentha plants and season.

2. Production economics of mentha processing

The processing units does only job work for mentha growing farmers so the cost of raw material is not
incurred by the owners of processing units. The farmers bring their raw material and get back the
essential oil after processing.
The production economic of the mentha processing unit is as follow:
A) Variable Cost
A) Variable Cost
SN Particular Unit/quantity Cost per unit Total cost
(Rs) (Rs)
A Variable Cost ( Per cycle/ processing of one tank mentha plant)
1. Diesel 0.5 liter 36/liter 18
2. Man Power (Man days) 1 25/ per tank 25
3. Fire woods (Borne by farmer) 2.5Q 1.5/kg -
Total 33
Total expenses for entire season 135 tanks 33 4455

B) Fixed cost (for entire season)


SN Particular Total cost (Rs)

1. Service , Repair and maintenance 200


2. Contingency & others 500
3. Consumable (Net Pipe & rubber) 1300
Total 2000

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C) Sub Total Expenses for entire season (A+ B): (4455+2000) = Rs 6455

D) Revenue realization for entire season Rs 20250/-


Total Unit job work Rate per unit(Job work) Total(sales realization)
(per year) In Rs In Rs
135 times 150 20250
E) Gross profit for entire season (D-C): (20250-6455) =Rs 13795/-
F) Capital Cost
Cost of working capital (Interest on capital amount) - Nil
Cost of fixed capital (depreciation value on machineries and equipments for one year) @ 10% annual
depreciation -10% 0f 39000/- =3900

G) Net Margin for entire year


Net Margin
=Gross margin- Capital Cost (E-F)
=Rs (13795-3900)
=Rs. 9895/-

(Rs Nine Thousand Eight Hundred Ninety Five Only)

Mentha Trading

There are two parameters which are used in procurement of essential oil in trading. The retailers procure
oil on CP (Congealing point) value and the wholesale traders procure oil on GLC (Gas liquid
chromatography) value. The detail of the various layers is as follow:

1. Trading in local market with petty procurers (from farmers to Haidergrh market)

The farmers sell their oil through the local traders. These traders come from farmers and general merchant
groups and have better holding and risk bearing capacity. They collect oil from near by area and sell it to
the traders based at Haidergarh on a margin of Rs 4 to 5/ liter. In this margin their all cost is included i.e.
conveyance, transportation, risk etc. Generally the local traders sell their oil at the same day. The farmers
also come to the local trader to sell their oil.

From farmers to Haidergarh there are three types of traders. Some traders are from farmers groups who
collect the abstracted essential oils from farmers of nearby areas on a predecided selling point and sell it
at Haidergarh. Some traders work as vendor and collect oil from farmers home and sell it at Haidergarh
market. Third types of traders are those, who work as procurement agent for traders at Haidergarh and
they work on a set commission pattern.

In Hiadergarh small and big retailer both operate their business. The big retailer who deal with wholesale
traders from Barabanki and have per day procuring capacity of more than one drum (180 liter to 200 liter
peppermint essential oil) and small retailers are those who has procurement capacity of less than 180 liter
essential oil per day. These small retailers sell their essential oil to the big retailer at Haidergarh. At
Haidergarh Vamshi Chemical Ltd has also established its procurement center.

Retailers and wholesalers use different techniques for assessing the quality of the essential oil. These
techniques are as follow:
8
2. Trading with whole sale traders and crystal manufacturer

The big traders based at Haidergarh sell essential oil to wholesalers and crystal manufacturers based at
Barabanki and Masauli. The wholesale traders based at Haidergarh and Masauli operate online trading
with multi commodity exchange and quote the rates to the retailer from Haidergarh on the basis of the
rates of Multi commodity Exchange. They assess GLC (Gas liquid chromatography) value for quality
check of oil and based on this they quote the rate to the retailer. They operate their business on straight
margin of Rs 55 -60/ in which entire cost of this layer is been included. In this margin the deviation cost
of GLC value is also been included. The standard GLC value is 68% concentration value of the essential
oil. If the concentration value is deviated (can decrease up to 60% to 64% based the on quality of the
essential oil) and any mixture found beyond the prescribed standard (i.e. tarpine mixture upto 8% is
acceptable) the rates of the oil will goes down and the entire lot may be rejected also. However the
average GLC of entire Haidergarh area is 64%.

Normally the local traders invest their won money for trading because license is required for trading of
mentha essential oil. The oil is much costly and a huge amount is needed for its trading operation (Rs
50,000/- to 80,000/- for 1 Q of essential oil per day), so the traders invest their own money to save the
taxes.

Use of mentha essential oil


The essential oil is used in pharmaceuticals and cosmetics industries. In these industries mentha is
normally used in crystal form rather than liquefied essential oil. The crystal units are based in different
regions of the country i.e. Jammu & Kashmir, Mumbai, Shambhal etc. In Barabanki and Masauli some
crystal units are also in existence. These units export mentha crystals to the China, Japan, Brazil,
Argentina, France, Germany, and UK.

In India menthol crystals are used in the pharmaceuticals, FMCG and cosmetics industries. Dabur India
Ltd, Pan Parag, Rajani gandha, Ranbaxi, Shipla, Hindustan lever Ltd, Procter and Gamble are the major
industries who use the menthol crystal as ingredients for their products.

Product
Crystal, the major product of the essential, oil is known as Flax which is sold with 25% value addition in
cost of essential oil. The rate for the best quality of Mentha crystal is around Rs 695/- to Rs 700/- per kg
for last season. After excluding all expences incurred in processing of crystal, the crystal manufacturers
do their business on a margin of Rs 10 to 15 per kg3.

By products
There are a large number of products which are prepared by using the by products of menthol essential
oils (around 250 products) which are much costly and have high demand in the national and international
market. The by product of essential oil is known as DMO (Dementholic Oil) which is sold in Rs 380 -385
per Kg. (ethanol, tarpin, cess, LM etc are prepared by use of Dementholic Oil).

3. Export of Mentha essential oil

There is a huge demand of mentha oil in export market. China, Japan, Brazil, Argentina, France,
Germany, and UK are the major destinations where mentha essential oil is exported. Mentha essential oil
has been included under commodity goods and the trading system is governed by the Multi Commodity
Exchange (MCX). Time to time MCX issue it’s circular and decides the detail guidelines for trading of

3
The cost calculation of crystal has been based on the interaction held with Owner of Crystal Manufacturing Unit based at
Barabanki.
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mentha essential oil. The trading is operated on the basis of future contract under the prescribed condition
decided by MCX. For the smooth trading operation MCX have established its exchange and additional
exchange at Chandausi and Barabanki respectively.

Under the future contract the rates, quality checks guidelines, maximum trading volume and other
relevant terms and conditions are decided by the MCX by the future dates for future trading. The traders
have to deposit the security amount to the MCX which is subject to return after completing the delivery
order. In case the delivery order is not fulfilled based on future contracts terms and conditions the security
amount will be deducted accordingly.

4. Trading economics on various layers

There are two methods of quality checkup up of the mentha essential oils practices by retailers and whole
sale traders separately. The detail is as follow:
1) Retailers (petty procurers): Retailers use the following practices for quality assessment
a) CP testing (Congealing point): In this testing they heat the oil with caustic soda and use the
thermometer for noting temperature of melting point after freezing the oil. This point is from 21 C
to 23 C. On the basis of this temperature they calculate the CP value of oil.
b) PH Value: The PH value is also measure through using the PH paper.
c) Pressure Technique: Through pressure technique they create fane in the oil in a bucket. If fane
create the quality of oil is degraded.

There are three layers of petty procurers up to the Haidergarh market. These petty procurers operate their
trading on a flat margin of Rs 5/-.

2) Whole sale traders and crystal manufacturing Unit.: Wholesale traders and crystal manufacturing
units operate their trading on Gas Liquid Chromatography (GLC) basis. GLC is a machine which is
used for quality check up of essential oil. The detail of their testing method is as follow:
a) Test any mixing in the oil
b) GLC (Gas liquid Chromatography): GLC machine is a computerize machine which is used for the
quality testing of mentha essential oil. The cost of machine is Rs. 5 lakh/. The operational cost of
the machine is also very high. The GLC operator should be a trained person who charge upto Rs
10000/- per mi\month as salary amount. 4
In this method the concentration of mentha essential oil is assessed. The standard concentration value
of essential oil is 68%. On 68% concentration full price is offered for the oil. The rate decrease as per
the concentration value decrease, which is @ Rs 5/- per 1% decrease in the concentration value.

Ex
Suppose the standard rate of mentha essential oil is Rs 530/per liter. The rates will be decided as
follow:
For 68% concentration value- Rs 530/-
67% concentration value- Rs 525/-
-----------------------------------------------------
----------------------------------------------------
64% concentration value Rs 510/-
-----------------------------------------------------
-----------------------------------------------------
60% concentration value- Rs 390/-
How ever the average concentration value of Haidergarh block is around 64%.
4
The assumption is based on the interaction held with Mr. Rajendra Singh, Manager Purchase, Mentha & allied products Ltd,
Barabanki.
10
Estimated Budget Center Establishment and Operation
Year I
Expenditure Revenue realisation
Cost Sub total
Total Unit/q per revenue
Unit/qua Cost per expenses in Sub uantit unit in Total Cost realisation in
SN Head Sub head ntity unit in Rs Rs total cost y Rs in Rs Rs
A One time investment (center establishment)
Office Setup
1 Computer 1 25,000 25,000
Internet and
telephone
2 connection Security amount and installation charges 1 3,000 3,000

5 Office furniture Visitors Chair 5 500 2,500


Office chair 2 1,000 2,000
Computer table 1 2,000 2,000
Office table 1 1,500 1,500
Electricity
6 equipments Fan & other equipments as per requirement 4,000 4,000

Drums, storage equipments etc 10,000

7 Total 50,000 50,000

35 Recurring cost Center coordinator 1 10,000 120,000

Transportation, Travel and conveyance (Team


39 leader, center manager, field staff) 3 5,000 15,000

40 Cleaning & others 1 500 6,000

42 Rent Rent for center accommodation 2,000 24,000

43 Internet and telephone charges 1,000 24,000

11
Administrative Postage and others
45 expences 500 6,000

46 Conveyance & others 1,000 12,000

47 Stationary and others 500 6,000

48 Others Tea for visitors & staff 500 6,000

49 Contigency 10,000

Total 229,000 229,000


Working capital for one season (45 days operation of processing unit in the
year I)

Fixed cost (cost


23 of production) Rent of land, store house etc ( monthly) 1,000 12,000 12,000

Interest- Cash for Market capita and


business operation - Rs 100000/- -
(Procurement and trading operation (200 liters
per day - capital amount amount for a cycle of
week and for three months projected rate in 18% per
26 Variable cost the season Rs700/liter) 3 months annum 45,000

Tranportation (Rs 3/liter) 18,000 3 54,000

Total 111,000 111,000

Sub total expences 390,000

C Sales realisation (For year I)


Entire sales margin (market capita +margin on
mentha oil trading -Rs 40 margin on per liter
31 mentha oil in trading- Average GLC 64%) 18,000 40 720,000

32 Total 720,000
Net revenue realisation for year 1 330,000

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Value chain Diagram

Domestic market Export market

Crystal Manufacturer at Pharmaceuticals


Barabanki, Masauli, Jammu and Cosmetics
and Kashmir, Bombay, industries

Whole sale traders at (Barabanki,


Company
Chandausi and Sambhal- minimum
manufacturing unit procurement one drum of 180 liter)

Vamshi Chemical Ltd Retailers at


(Procurement centre at Haidergarh Layer-2
Haidergarh
Retailers at
Haidergarh Layer 1

Collection from local Traders from near by market


traders from farmers home (Kothi, Nai Sadak,Haidergarh, Inhauna,
Subeha, Bhilbal, Triveni ganj, Gangaganj,
Gosaiganj, Shukl Bazar)

Job Work by processing


units Farmers
(Harvesting of mint and
(Mint processing and
abstracting essential oil) abstracting Essential oil

Seed and Fertilizers


from local market
Haidergarh

13
Inferences
1. The peak season for essential oil abstracting and selling is around four months (from May last to
October). At this time many traders from outside area come at Haidergarh and they establish their
temporary procurement centers.
2. The rates of essential oil are decided and controlled by Multi Commodity Exchange (MCX) Mumbai.
The whole sale traders get license from Multi Commodity Exchange and get membership for online
trading. They use the website of MCX and make update themselves for per hour’s rate of essential oil
in commodity market.
3. Though the essential oil is included under commodity goods yet government does not decide support
price for peppermint essential oil.
4. The fluctuation in the rate is very high and it goes ups and down within hours.
5. For the year 2008 the highest price for the peppermint essential oil was Rs 860/ which was seen in
the month of July whereas the lowest price for the oil was Rs 470 which was seen in Oct. last week.
6. Since the peppermint essential oil and its products are traded in the export market in large volume so
the global financial crises have also made its impact on peppermint essential oil market. Due to global
financial crises the rates has been gone down.
7. Local traders do their business on very low margins around Rs 5 per liter of essential oil.
8. Whole sale traders procure essential oil on a margin of Rs 55-60/ liter based 68% GLC rate.
9. License is required for trading and the traders have to pay 3% as sales tax and 2.5% as mandi tax.
However paying for mandi tax is disputed and litigation is going on in the court on this issue.
10. Trading of peppermint essential oil require huge investment in terms of working capital (Rs 50,000/-
to Rs 80,000/ for trading of 1 Quintal of essential oil per day) for its day to day operation. Since the
retailer of layer1 and layer2 operate their trading without license so they use black money for its day
to day operation.
11. The marginal farmers sell their products to get cash in their day to day operations whereas the farmers
who have the holding capacity they wait for good rates.
12. Entire trading (especially with local traders) goes on verbal basis and the wholesalers never do fraud
in rates with traders. The local traders update themselves hourly basis.
13. There is very high level competition in the market and each and every trader try to procure maximum
oil. Because the ratio is very simple, more quantity means more profit.

14