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Benefits Of Decentralized Cooking Oil Industry

Mahatma Gandhiji had said that, if we desire the equitable structure of society free from any kind of exploitation, it is essential that the means of production must be in the hands of common people who should manage, control and also own such means of production. This is possible only if technology of production is decentralized at very small scale level-almost at home scale level. One of the most striking virtues of such decentralized home scale or village scale technology is that it creates self reliant and self supporting society completely protected itself from the external economic forces.

This contention has been vividly proved by us in case of edible oil industry by establishing 700 tiny oil mills in villages of India and 1100 tiny oil mills in 86 African, Asian and Latin American Countries. Although big oil mills and tiny oil mills use the same modern expeller technology for oil expression, socio-economic results of both kind of mills vastly differ from each other and it can be seen from the following comparison that operation of edible oil industry through tiny expeller units at village level is very much favourable and greatly beneficial to the society.

Big oil mill means a mill having crushing capacity of 25 to 100 tonnes/day or still bigger, while tiny oil mill will have crushing capacity of one tonne per shift or less. The following differences between big oil mills and tiny oil mills are noteworthy.

  1. Tiny oil mills in villages of India work on job work basis. Mill owner has not to purchase oilseeds or he has not to sell any product. He simply crushes the oilseed on behalf of villagers and earns only job work charges. So there is no element of trading and marketing in this activity. Villagers go with their oilseeds and get it crushed in the tiny oil mills. So economic activity of tiny oil mill is completely different from that of big oil mill. In African and other countries also, when number of tiny oil mills will go on increasing up to saturation level, the work will go on shifting on job work basis
  2.  Production in tiny oil mills is for consumption and not for marketing. People come with their own oilseeds to get it crushed for oil for their own use and not for selling. So speculation becomes impossible in tiny oil mill because  marketing does not come into picture. But in big oil mills, speculation is practiced on mass scale level.
  3. Nowadays adulteration is wide spread evil in big mills. It is completely eliminated in tiny oil mills because crushing is carried out in the presence of customers.
  4. Hoarding and profiteering is inseparable part of the activity of big oil mills. Tiny oil mill is free from this evil because tiny oil miller has not to purchase or sell anything.
  5. Transport charges are mostly eliminated in tiny oil mills. Big mills located in towns & cities fetch the oilseed from 50 to 200 kilometers far or sometimes even more. Diesel & other transport expenses worth millions of Rupees are wasted in transporting oilseeds to big mills and again oil to remote villages. This is wastage of the national energy. Tiny oil mill mostly saves this expense.
  6. Customers of tiny oil mills use the same oil tins for refilling the oil every time and same tins last for many years. Big mills use new oil tins every time, which customers have to sell at throw away prices. Thus tiny oil mill completely saves the cost of metal oil tins of 15 kg. And prevents national wastage. In many countries, oil is packed into transparent plastic bottles which cost heavily. Packing expense is sometimes 20%. This must be avoided. I have seen In Malawi that people have already started to use their own containers and save packing expense completely. This tendency will go on increasing everywhere. This is not possible in big oil mills.
  7. Tiny oil mill provides fresh and pure edible oil to villagers and customers. More over, it makes available protein rich precious oilcake as excellent cattle feed. So, it increases milk production considerably. Thus tiny oil mill considerably contributes for improving nutritional and economic standards of rural people. In case of big oil mill, it takes away oilseed to cities from where oil cake is exported and never comes back to villages. So it results into drain of not only wealth but also nutritious cattle feed.
  8. Big oil mills exploit farmers through complicated system of purchasing oilseeds through commission agents and traders. They make injustice to farmers in weighing of their oilseeds, in deducting trash elements and in fixation of seed ratio, on the basis of which payment is made. This entire injustice is automatically removed in tiny oil mills because of absence of selling purchasing activity.
  9. Big oil mill is owned by one person or one family employing 50 to 100 persons working for the owner. But in case of tiny oil mill, owner himself is a worker as a self employed person. Thus tiny oil mill brings equality in society, while big oil mill creates disparity in the society.
  10. Big oil mill has very big production capacity having turnover of millions of Rupees. So its power of exploitation is very big. Malpractice and mismanagement and profits run into big figures. Tiny oil mill being tiny in nature can not exploit people.
  11. Big oil mills have to keep large warehouses to store lot of oilseeds. So they require huge working capital and they have to pay heavy bank interest on borrowed capital. All these eventually fall on society in the form of increased rates of edible oil. Tiny oil mill is completely free from this evil. It has not to store oilseed or oil for custom milling activity.
  12. Big oil mills have to devise their marketing strategy through distributors, dealers, commission agents, advertisements etc. Tiny oil mill has not to pay any commission to anybody. In village, all villagers are customers. In city, neighbours and neighbouring area are the customers. So all customers are known to oil miller. So no any evil can enter into relations of oil miller with his customers.
  13. Big oil mills may face labour problems, strikes, agitation etc. They have to employ labour consultants, tax consultants, advocates, accountants etc. Tiny oil mill has no such expense at all.
  14. Big oil mill can not function without centralized bureaucratic infra structures of public utility services such as banks, telephones, communication, transport etc. Cheques of hundreds of thousands of Rupees are to be cleared everyday to maintain enough cash flow. Hundreds of telephones are connected everyday. All these evils do not come into picture in tiny oil mills running on custom milling.
  15. Government taxation such as sales tax, purchase tax is eliminated in tiny oil mill. This benefit goes to really needy people.
  16. Big mill has to ensure at least one month's oilseeds supply before starting the mill e.g. for 25 tonnes/day capacity mill, about 600 to 700 tonnes of oilseeds must be available before starting the mill. Tiny oil mill can be started and stopped very frequently even to crush 100 kg. Of oilseeds at any moment.
  17. Big oil mill has to employ 40 to 50 workers. The miller has to forecast the continuous availability of raw materials for some months and accordingly, he will plan to appoint the workers or assign the labour contract for fixed period. Then he can't close his mill. Tiny oil mill can be started or stopped very frequently even twice in a day and no advance planning is required.
  18. Big oil mills require huge quantity of oilseeds everyday. So they can't procure and collect oilseeds from large number of persons having very small quantity from scattered sources. It becomes uneconomical to them. They run the mill until enough quantity is smoothly available from agents, dealers of oilseeds in bigger quantity. When this is not possible, they close down the mill. So crushing season for big mill lasts for 6 to 7 months in a year. While tiny oil mill can run for 10 to 11 months in a year, because it is suitable to crush even 100 kg. of oilseed. Thus tiny oil mill becomes useful to large number of people having very small quantity of oilseeds. So capacity utilization of tiny oil mill is far better than that of big oil mill.
  19. Investment in tiny oil mill calculated on per tonne of utilized installed capacity is far less than big oil mill. 25 tonne capacity oil mill has capacity utilization only 50% as it runs only for 6 months. So investment per tonne of utilized capacity becomes double. But Tiny oil mill of one tonne per shift has capacity utilization 80 to 90%. So investment per tonne of utilized capacity is half of big oil mill.
  20. In actual practice, tiny oil miller in India incurs the expense of Rs. 500/-(US$12/-) for crushing one tonne of oilseed which includes power, labour, rent, depreciation, interest etc. Big miller considers the expense of Rs.1000/- per tonne of crushing, while giant oil miller having 100 tonnes or more capacity considers expenses of Rs. 2000/- per tonne including overheads. So it is quite clear that economy of big scale does not hold true here. In fact, tiny mill's overhead expenses are the least. As the size of the mill grows, overhead expense per tonne also increases.
  21. Big oil mill has to stop the production temporarily in the situation of 'Disparity' which occurs under speculative forces. 'Disparity' means the adverse economic situation where running the oil mill becomes unprofitable because the market value of oil + oilcake becomes lower than market price of oilseed + oil mill expense. Tiny oil mill running on custom milling is free from this evil and it goes on working even under disparity condition.
  22. Over and above this picture, some benefits are far more valuable which can not be measured in terms of money. One of the most striking benefit is that tiny oil mill creates technological awareness into illiterate villagers. Wherever, tiny oil mill is established, it becomes the subject of interest for entire village. Students and boys go to mill and observe its function to satisfy their curiosity. Whenever expeller or filter press is opened, boys gather together to understand the mystery of oil mill. Some boys grasp the technology immediately and it becomes the subject matter of discussion with their class mates. People begin to understand the technology of oil mill. A great confidence is created among villagers that villagers also can run industries. Economics of oil mill no more remains secret and people begin to understand yield of oil and oil cake, expenses incurred by miller and his income and profit. People begin to think for other process industries also. In this way, gate is opened for creative thinking among villagers and know how is automatically disseminated without any cost.

Looking to the above points, it will be clear that even though technology in big mill and tiny oil mill is the same including expeller, filter press, boiler, decorticator etc., there is a vast difference in socio economic effects of both the kinds of mills due to only size of the production capacity. It is clear that, on the whole, big oil mill is a blood sucking exploitative industry detrimental to the society, while tiny oil mill is a self reliant healthy rural cottage industry, nourishing the society. It is really blessing to common masses. At present a few thousands big oil mills situated in cities and towns of India crush major crop of oilseeds and exploit the entire India. But if 200000 of tiny oil mills are established in villages and cities, economic benefit of at least 50000 millions of Rupees can reach to villagers and common people and employment to 200000 of families can be provided in villages.

In view of the above ideology, I developed tiny oil mills and now 1800 tiny oil mills are working in 85 countries of the world most satisfactorily beyond my imagination and expectation. It is a humble experiment of decentralization. Only in Saurashtra, about 100000 tonnes of groundnut and other oilseeds are crushed into these tiny mills producing 2 million tins of oil (1 tin = 15 kg) and 40000 tonnes of oilcake. Total value of the product goes up to 2600 million of Rupees (US$ 60 million) out of which nothing goes to cities. Total benefit of about 260 million of Rupees is automatically distributed among half million families living in 1000 villages. This entire activity remains completely free from profiteering, hoarding, speculation, transport charges, government's taxations, middleman's' profit etc. This is the result of a small experiment of only 600 tiny oil mills. But if 200000 tiny oil mills are established throughout the India, its results will be tremendously significant. If tiny oil mill is encouraged wholeheartedly, it can really change the scene of edible oil industry in India.
In Africa and other countries, 1100 tiny oil mills are working as self employment enterprises. Transport cost in Africa is 10 times higher that in India. So tiny oil mills in Africa are highly profitable because there is complete absence of competition of such mills in rural areas. But these mills provide pure and fresh edible oil to the people. Particularly in Zimbabwe, 80 tiny oil mills have created their very high impression due to the efforts of ITDG and are working with their own brand names and providing pure, natural cooking oil to the people through Super Markets. To less extent, similar will be the situation in totally 86 Countries including Madagascar, Ghana, Malawi, Tanzania, Zambia , Uganda, Ivory Coast, Burkina Faso etc.

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