The Origin and History of Coconut Oil

TO STUDY THE PROCESS OF MAKING PARACHUTE OIL
A PROJECT REPORT ON
TO STUDY THE PROCESS OF MAKING PARACHUTE
OIL
SUBMITTED IN PARTIAL FULFILMENT OF THE
REQUIREMENT FOR
MASTER OF COMMERCE (M.COM)
ACCOUNTANCY GROUP
SEMESTER- I
IN THE SUBJECT
ADVANCE COST ACCOUNTING
TO UNIVERSITY OF MUMBAI
BY
JAYESH KORNA
ROLL NO. 13A116
2013-2014
UNDER THE GUIDANCE OF
PROF.P. DR. AMIT PRAJAPATI
CHETANAS
H. S. COLLEGE OF COMMERCE & ECONOMICS
& SMT KUSUMTAI CHAUDHARI COLLEGE OF ARTS
BANDRA (EAST), MUMBAI 400 051
1 | Page
DECLARATION
I, JAYESH KORNA, student of Master of Commerce

(M.Com) Accountancy Group Semester- I, Roll No.
13A116 of Chetanas H. S. College of Commerce &
Economics & Smt. K. C. College of Arts, (CHETANAS M.
COM. CENTRE) Bandra (East), Mumbai 400 051,
hereby declare that I have completed the project on To
Study The Process Of Making Parachute Oil in the
subject Advance Cost Accounting for the Academic Year
2013-14.
_________________________
JAYESH KORNA
Date: 29TH August, 2013
2 | Page
CERTIFICATE
I, PROF.DR AMIT PRAJAPATI hereby certify that JAYESH

KORNA , Roll No 13A116 of M.Com. Semester I of
Chetanas M.Com Centre , has successfully completed
project on To Study The Process Of Making Parachute Oil
in the subject Advance Cost Accounting for the Academic
Year 2013-14.
________________
Internal Guide
Guide
________________
__________________
3 | Page
_________________
External

Coordinator
Principal
4 | Page

ACKNOWLEDGEMENT
At this juncture, I would like to express my sincere

gratitude to those who have helped me directly or
indirectly during this project.
My sincere thanks to Prof. Dr Amit Prajapati for his
whole
hearted
support,
constructive
advice
and
practical guidance. I would also like to thank the college

library for the reference material and information used.
_________________________
Jayesh korna
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CONTENT
SR. NO
DESCRIPTION
PAGE NO.
Part I
6-9
Part II
Overview of coconut oil

Industry
Origin and History of
Coconut Oil
Objective, limitation and
executives summary
Research methodology
Part III
Interpretation and analysis
10-42
1.
Coconut Oil and Global

Economy
Coconut Oil and Indian
Economy
Coconut Oil and Local
Economy
Conclusions
10-22
1.
2.
2.
3.
Part IV
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6-7
8
9
23-34
35-42
43
The Origin and History of Coconut Oil :

Coconut oil is derived from the seed of the palm, Coconut, Cocosnucifera. The
origin
of Coconut is believed to be from the islands of the Western Pacific and eastern
Indian oceans. The coconut seeds germinate even after floating in ocean
currents for 3- 4months, enabling their dispersal across the Indo-Pacific belt.
Further dispersal to different parts of the world was enabled through human
intervention through navigators of Arab, Polynesian, Malay and European
origin.
Reference to the coconut is made in ancient Sanskrit writings of India,
dated to 4thCentury BC and in Tamil literature as early as between the 1 st and 4th
century AD.From historical data such as use in rituals, southern coastal India
appears to have usedcoconut much ahead of the north.
Cultural context of Coconut :

In South Asia Coconut is considered a complete tree and often addressed as
kalpavriksh (tree that provides whatever is wished for). It is also referred to as
sriphala(fruit of the gods) since, every part of the palm can be used for some
purpose related to human need food, shelter and fibre. It is an essential
component in every Indian ritual as it symbolises divine consciousness1.
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Relevance of Coconut oil in Dietary and Cosmetic habits of Humans :

Coconut oil is one of the important products from Coconut. It is extracted from
the dried kernel, referred to as copra. It has been used over centuries as a hair
tonic and a skin care product, due to its moisturizing properties. It therefore
finds high demandfrom the cosmetic industry in the preparation of soaps, hair
oils, body oils, and the like.Coconut oil is used as a cooking medium in southern
parts of India, especially Kerala state. It has of late gained popularity in other
markets as a medium of cooking due to increased research on its health benefits.
The oil is also popular in the preparation of confectionaries such as margarine,
ice creams.
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OBJECTIVE OF STUDY:
To study the coconut oil industry

To get broad knowledge of uses of coconut oil
To study the potiential of industry
LIMITATION :
It is limited to some countries only
It is the small part of oil industry
It is less in demand as compared to petroleum product
Available substitute
Less in demand in foreign countries
Less amount of total consumption
SMore competition form substitute oil
SUMMARY:
The project is based on the secondary data collected from the various sits and reference
books. Project consist of the numerical figure for understanding of coconut oil industry.
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RESEARCH METHODOLOGY:
The present investigation is a descriptive types of study under taken to estimate the potential
of coconut oil industry all over the world.
SAMPLE SIZE:
For the purpose of analysis a sample size of coconut oil industry in india were selected. The
sample size taken was india (countries).
SAMPLING METHOD :
The sample method used for the project was Random sampling this types of sampling is
also knows as probability has an equal chance of inclusion in the sample and each of the
possible sample .the procedure give each item is an equal probability tobe selected.
DATA COLLECTION SECOUNDARY DATA :

The secondary data was collected by referring through web sit and final data was analysis
systematically to achieved the dersiredresult.
DATA ANALYSIS AND INTERPRETATION :

After analysis the data come to the following interpretation .interpretations has been done on
the basis of the feature mention in the data.
The industry potential is limited to some extend

There is less demand due to the available of substitute
It is used by only some countries
Technology use in production were not so efficient
Potential is limited to cultural countries only
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PART II
Coconut Oil and

Global Economy
Global Trade in Coconut Oil :
Coconut oil is listed among the nine internationally traded vegetable oils. Although
considered healthy edible oil, it ranks eight in global production of vegetable oils.
The largest produced and consumed vegetable oils are Soyabean oil and Palm Oil.
Production of Rapeseed and Sunflower seed oils are approximately half of the
production of Soy and Palm oils, while the other oils constitute individually about
one-eight the production of these oils.
Table
World Production of Vegetable Oils
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Vegetable Oil % to total

Production
Soybean
Palm
Rapeseed
Sunflowerseed
Peanut
Cottonseed
PalmKernel
Coconut
Olive
Average Total
30.14
28.92
14.02
8.72
4.83
3.97
3.53
3.27
2.61
100.82
Production
(2000-2004) Mn MT
Major Producers of Coconut Oil
The largest producers of coconuts and coconut oil are Indonesia and Philippines
followed by India. The production of coconuts over a eight year period from 19972004 has shown a negative growth rate in many producing countries such as
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Philippines, Vietnam, Papua New Guinea, Mexico and Sri Lanka. This could be
attributed to the easy and cheaper availability of substitute vegetable oils like Palm oil
and Soya Bean oil.
Global Production of coconuts (Million nuts)
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Source: FAO Statistics
Table :
Country- Wise Production of Coconut Oil (Million MT)
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Source:http://www.foodmarketexchange.com/datacenter/product/fruit/coconut/detail/dc_p
i_ft_coconut0603_02.htm
The global Coconut oil trade is worth around 20 million USD. World Production of
coconut oil has grown at a modest rate of 0.5 per cent per annum over a 11 year period
(1993-94 to 2004). Consumption of coconut oil has grown at a rate of about eight per
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cent per annum for the same period. Production appears to follow a lag price, as is
evident from the global production and price data (1993-2004). Thus, when prices in
a year increase, production in the following year increases, leading to a reduction in
prices due to possible oversupply.
Source: http://www.fas.usda.gov/oilseeds/circular/1998/98-06/jun98opdt1.htm
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Major Buyers of Coconut oil :

Coconut oil accounts for about 4.5 to 5 per cent (in volume) of the total global trade in
vegetable oils. International trade in coconut oil is modest and prone to price
fluctuations, indicating an elastic demand. A look at the figures in Table 6 indicate
that imports in any given year that follows years with high prices reduce, pushing
prices down for the subsequent year. This indicates a fairly high degree of price
sensitivity of the oil, chiefly due to the availability of other edible oil substitutes. In
terms of international trade, coconut oil ranks fourth both in terms of global exports
and imports, followed by cotton seed oil, olive oil, rapeseed oil, palm kernel and
peanut oils. Global imports of coconut oil have grown at the rate of 2 per cent per
annum from 1993 to 2004, closely corresponding with the annual growth rate of 1.4
per cent of exports of the oil. The major importers of coconut oil include the European
Union, USA, Malaysia, South Korea and Others.
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Table
Percentage share of coconut oil in global trade of vegetable oils
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Source://www.foodmarketexchange.com/datacenter/product/fruit/coconut/detail/dc_pi_ft_
coconut0706.htm
Global prices for coconut oil are fixed at c.i.f. Rotterdam in The Netherlands. Price
trends for coconut oil fluctuate between years. Considering the figures in Table 7
along with the price index represented in Fig (2 ), it can be seen that the prices tend to
fluctuate between alternate years, possibly due to situations of oversupply and excess
demand, respectively. Global prices also indicate seasonality of demand, with demand
peaking during June-September that coincides with period of rains, when coconut oil
production is affected (Fig 3). With the availability of cheaper substitute edible oils,
especially of Palm oil (that constitutes about 56 per cent of the total trade in vegetable
oils) the demand for coconut oil for edible purposes has been affected.
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Figure
Monthly global prices of coconut oil (USD/ tonne) c.i.f. Rotterdam
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Grades of coconut oil traded:
RBD (Refined Bleached and Deoderized) oil is the common grade of coconut oil
traded. Virgin oil (oil from coconut milk) is gaining popularity in niche markets.
Grades of coconut oil traded :

RBD (Refined Bleached and Deoderized) oil is the common grade of coconut oil
traded. Virgin oil (oil from coconut milk) is gaining popularity in niche markets.
2005Global
R & D in Coconut :
Global research in coconut and its products is promoted by the International Plant
Genetic Resources Institute (IPGRI), based in Rome through its COGENT network
(International Coconut Genetic Resources Network).
Although not directly involved in varietal improvement or technological upgradation,
the Food and Agriculture Organization undertakes research on the production and use
of coconuts as a commodity.
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PART III
Coconut Oil
Coconut Oil and
Indian Economy
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Relevance of Coconut oil to the Indian population :

As mentioned earlier, India is the third largest producer of coconut oil. The area under
coconut and production of coconuts have grown at the rate of about 2 per cent per
annum since 1949-2003. However, it is not a major global player in trading in coconut
oil as most of the oil produced in the country is consumed domestically.
The state of Kerala is the largest producer of coconuts and coconut oil in India, with
the largest area under coconuts. However, Tamilnadu state leads in the productivity of
coconuts. The poor yields in Kerala are being attributed to the old palms that need to
be replaced. It can be said with a fair degree of certainty that the state of Kerala
consumes the highest amount of coconut oil.
Between 1949-50 and 2002-03, four points in time can be identified where the
productivity and thereby production has leaped. These years are 1984-85(see
highlighted in Table 9), 1988-89, 1992-93 and 1994-95.
It can be observed that between the years 2001 and 2003, the area under coconuts has
reduced, consequently affecting production (around 6 per cent lesser than the previous
year). This reduction is possibly due to the low prices on the product. Between the
years 1994 and 2001, the production has reduced (by about 2 per cent
23 | P a g e
Table
State wise Area, Production and Productivity of Coconuts in India
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Table 9
All India Area (Million Hectares), Production (00 Million nuts) and Yield
(Nuts/ Hectare) of Coconuts (1949- 200
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As per data from the Foreign Agricultural Service of the United States Development
Agency, the per annum growth in production of coconut oil in India is around 4.6 per
cent; while consumption for edible purposes is a modest 2.4 per cent. However,
industrial consumption of coconut oil (that includes hair oils, toiletteries and other
non-edible uses) has grown at the rate of 8.4 per cent per annum over a 19-year period
(1986-2004).
India consumes most of the coconut oil it produces and the export/ import of the oil is
not significant. Of the total production of coconut oil, about 48 per cent is consumed
by the industrial (non-edible) sector and the rest for household purposes and in the
preparation of confectionaries. The domestic coconut oil sector is worth at least Rs
220 million
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All India Production, Consumption and trade in Coconut oil
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Price Trends in Coconut Oil in India :

The major markets for coconut oil in India are Kochi, Kerala and Kangayam,
Tamilnadu.
From the Table (Table 11) and the Fig (2), it is evident that the prices of copra and
coconut oil move very close, which is not surprising considering that the demand for
copra is derived from the demand for coconut oil. In both cases, prices have been
rising till 2000 (with occasional dips), followed by a sudden dip after 2000. There has
been an uptrend in the prices since 2002-03. This is being attributed to increased
demand due to development and promotion of diversified products such as hair oils,
tender water, coconut milk powder, etc. In addition to this, it is believed that with the
onset of Futures trading in coconut oil, demand has perked up for the product.
32 | P a g e
Table
Average price of Copra and Coconut oil (Rs/ Qtl) in India
(Kochi prices 1993-2003)
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(Source: CDB)
Interestingly, the price indices of coconut oil in Indian and Global markets show a
contradictory trend till 1999-2000, subsequent to which they move in the same
direction. Indian prices move at a higher rate compared to the global prices, possibly
due to the higher demand and consumption rate in the domestic market. In addition,
the crop has been afflicted by diseases and pest infestation affecting production and
quality of the produce
Minimum Support Price for Coconut

The Commission on Agricultural Costs and Prices (CACP) fixes Minimum Support
Prices (MSP) for about 25 commodities, copra being one of them. Copra prices are
fixed for both Ball and Milling Copra. This serves as a benchmark to ensure that
farmers/ producers get a good rate for their produce. The National Agricultural Cooperative
Marketing Federation (NAFED) through the co-operative societies procures
the coconuts/ copra, for further sale, export and distribution.
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R & D in India :
In India, research on coconut is carried out through the Coconut Development Board.
Research includes development of new varieties, development of improved
technology for better efficiency in coconut utilisation, and in development and
promotion of diversified products from coconut.
The Indian Council of Agricultural Research, through the network of State
Agricultural Universities and the Central Plantation Crops Research Institute
(specifically the Center at Kasargode) also conducts research on coconut
development. This includes varietal improvement programmes for yield, pest and
disease resistance, agronomic practices and the like.
Value Chain
The steps involved in the value addition process of coconut oil are as follows:
Coconuts--------------Copra---------------Coconut oil
Coconuts are either sun-dried or smoke dried. Copra is processed using rotary chucks
(which is quite common) or expellers (considered more efficient). The coconut oil is
then further processed as per market requirements.
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Marketing Channels for Coconut Oil

Producer-Co-operative Society-End User
Producer-Processing Mill-Trader/ End User
Producer-Agent-Processing Mill/ Trader-End User
Major Brands of Coconut Oil

Marico Industries (Parachute, Hair and Care, Oil of Malabar and Shanti Amla),
Hindustan Lever Ltd (All Clear) and Dabur India (DaburVatika, DaburAmla) are the
major producers of branded hair oils. Marico is the market leader amongst the
companies, having 52% of the market share through its flagship brand, Parachute Oil.
However, branded oils are estimated to form only about one-third of the total market
for hair oils2, the rest being catered by the loose oil segment.
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PART IV
Coconut Oil and

Local Economy
Impact of Coconut Oil in a local economy

This section explores the relevance of coconut oil in the economy of a community,
through the cases of the partner communities of Just Change. For this, representatives
of three partner communities (AdivasiMunnetraSangam, Gudalur; SAWARD,
Calicut and BVM, Nilambur) were invited for separate focus group discussions (FGD)
in their respective areas of operation (at Gudalur, Calicut and Nilambur) and relevant
information on demand for coconut oil and production processes of the commodity
were elicited and documented.
Consumption Patterns
Coconut oil is the preferred edible oil in all the three communities. It is also used as a
hair and cosmetic oil, usually in raw form. On an average, a family consumes about
1.25 litres of coconut oil in a month. Members of BVM consume between 2-2.5 lts of
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oil. It is generally bought in packets from local shops or directly from the mills. AMS
members buy unpacked oil in small quantities, as per their daily requirement.
Seasonal variations in demand
Demand for the oil rises during holidays and festivals, with consumption peaking
during months between March to May, and prices rising during the monsoon (JulySeptember).
Preferred Varieties/ Brand Names

Kera, Maveli, Shudhi and Parachute are the popular varieties, of which Kera is
preferred in terms of both quality and price
Average price paid and maximum willing to pay

The communities pay between Rs.50 (from Mills) and Rs 65-70 (in packets) per litre
of oil. The maximum price that they are willing to pay ranges between Rs 70-75/- per
litre, beyond which they will reduce consumption of the oil and use substitute oils for
edible purposes. However, they will continue to buy for hair and cosmetic purposes in
small amounts if the price goes beyond Rs 90 per litre, as no substitute is envisaged
for the purpose. This throws an opportunity for exploring the hair/ cosmetic oil market
through product diversification. AMS members currently pay around Rs 80/ litre of
coconut oil, by way of paying more for the small, frequent purchases of oil. In case
demand for oil is more, they substitute other refined oils such as palm oil for coconut
oil. BVM and SAWARD members are also producers of coconuts. Hence, their
willingness to pay is dependent on the price they receive for their coconut produce.
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Production of Coconut oil
Production of coconut oil involves three stages- production of coconut; conversion of
coconut to copra and milling of copra to get coconut oil. SAWARD is the only group
involved in the commercial production of coconut oil. However, both BVM and
SAWARD members grow coconut and make copra, even if for domestic purposes.
Hence, an economic analysis of the different stages of the value addition chain will
help understand the economic impact of the crop on the communities.
Production of Coconuts
All production activities related to a coconut farm are reported on a per palm basis.
Hence, the costs analysed are also on a per palm basis. The fixed costs incurred at the
time of planting include cost of seedling and digging pits for planting. Pre-bearing
costs (upto 8 years after planting) including costs of manuring, mulching and
provision of required nutrients (Table 13). Pre-bearing costs are discounted at the rate
of 10 per cent per annum to get the present value of the costs. This, then with the.
planting cost when amortized at 10 per cent per annum over 50 years (the average
economic life of a coconut) results in an annual fixed cost of Rs.34/ palm.
Maintenance costs including cost of inputs, opening and closing the basin of a palm
each year works out to about Rs. 75/ palm. Harvest cost per palm (even if for one
coconut) is Rs 5/-. Hence, the total production cost works out to Rs 114 per palm.
Cost of marketing is a minimum of Rs.25/ 100 coconuts (=40 kgs). A good palm
yields around 600 coconuts in a year. Hence the total cost per palm is around Rs.300/-
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Table
Cost of Production of a coconut palm in Kerala
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Sale and Returns
Returns
The market rate in Kozhikode for coconuts is Rs.8.75/ kg. Hence, the potential returns
from a good yielding palm (around 600 coconuts per year) is around Rs.2100/- per
annum. Members of BVM get only Rs.3.50 per kilo as agents directly buy the
coconuts from their doorstep. They would hence get only Rs.420/ per palm per annum
for a palm that yields around 300 coconuts, about Rs.600 less than what they could
potentially earn. By selling to traders at Nilambur markets, they get around Rs 7.5 per
kilo. If they bring to a larger market close by, their revenue will be higher. The
argument for such sale is that the families have few palms making it unremunerative
to market such distances. However, by pooling their produce it is possible to achieve a
higher bargaining position in the market.
42 | P a g e

Production of Copra and Coconut Oil
The next stage in the value addition chain is the drying of coconuts to yield copra.
Commercial drying involves the use of driers, where a single unit can dry about 1000
coconuts in a batch every 3 days. Around 130 batches are processed in a year. The
costs and returns involved in the production of copra and later milling to produce
coconut oil are highlighted below. Annual fixed costs work out to around Rs 4,900/- at
the rate of 10 per cent discount rate (Table 14). This includes cost of drier, balance,
implements and other items. Maintenance costs include cost of coconuts, labour for
breaking and arranging the coconuts on the drier, shelling costs, fuel costs.
Once dried, the copra is graded and milled. 1000 coconuts give around 105 kg of
copra. Milling costs work out to Rs.3.5/ kg of copra. Cost of bottling and labeling
work out to around Rs.5.25/- per bottle
Table 14
Cost of production of Copra and Coconut oil
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Returns
Coconut oil is sold at the rate of Rs.60 per litre as unpacked oil and at the rate of
Rs.65/ litre in bottles at a nominal margin of about 8 per cent. This oil is of fine
quality. The prices of coconut oil in the market vary between Rs.50-75 per litre. It is
believed that the low prices are a consequence of blending different edible oils, or
different grades of coconut oil.
44 | P a g e
PART V
Conclusions
Coconut oil production is an economical venture as long as there is effective demand
for the oil. With substitutes easily available at cheaper prices for the edible oil, pricing
of the oil becomes a crucial aspect in marketing. Given the inelastic demand for hair
oil, it will be worth exploring the production and market opportunities for such oils
and other cost-effective value added products of coconut.
45 | P a g e

The Origin and History of Coconut Oil

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TO STUDY THE PROCESS OF MAKING PARACHUTE OIL

TO STUDY THE PROCESS OF MAKING PARACHUTE OIL

I, JAYESH KORNA, student of Master of Commerce

Date: 29TH August, 2013

TO STUDY THE PROCESS OF MAKING PARACHUTE OIL

I, PROF.DR AMIT PRAJAPATI hereby certify that JAYESH

TO STUDY THE PROCESS OF MAKING PARACHUTE OIL

TO STUDY THE PROCESS OF MAKING PARACHUTE OIL

At this juncture, I would like to express my sincere

practical guidance. I would also like to thank the college

TO STUDY THE PROCESS OF MAKING PARACHUTE OIL

Overview of coconut oil

Interpretation and analysis

Coconut Oil and Global

TO STUDY THE PROCESS OF MAKING PARACHUTE OIL