Prices in big markets of Mumbai, Rajasthan, and Madhya Pradesh have fallen below the price in Gujarat, making inter-state oil export an unprofitable venture, putting the oil millers in a fix. Now, the oil millers are kicking their way out of the mess by creating an artificial scarcity of groundnut oil in the market to create demand.

Against a demand of 3,000 tonnes of oil in the state there is a production of less than 2,500 tonnes daily and the millers are in no mood to increase it. This is creating a scarcity which is leading to a gradual rise in price. In the complicated oil economics and price mechanism of Saurashtra, the consumer has ultimately ended up as the loser. Between a government that has cracked under pressure and the arm-twisting tactics of SOMA, the common man has been forced to pay almost Rs 10 more for a kg of groundnut oil.

This, despite a good groundnut crop and oil production about to reach its peak. Normally, a kg of groundnut oil should be available for Rs 42 during December but already it has risen to Rs 45 and by December 20 it is expected to reach a staggering Rs 56 per kg.

With the season ripe for Gujarati households to buy their annual stocks the artificial scarcity will lead to a demand that will trigger a price rise. Otherwise, there is no reason for prices to rise when all the groundnut oil that is produced here remains in the state with inter-state movement almost ceasing. And with a daily production of 2,500 tonnes there should be a glut shortly.

The oil millers are forced to do this because they cannot export oil to other states now. The prices in Mumbai and elsewhere have fallen drastically after a bumper crop from the southern states flooded these markets and it is no longer lucrative to do business there when prices at home are higher.

Under other circumstances the millers would have exported oil rampantly, which would have again caused a shortage here resulting in prices shooting up.

The state government, which has learnt from experience, has nipped this design in the bud lifting the curbs only after the prices outside the state had fallen below the existing prices in the state.

On the other hand, the farmers after benefiting from an initial price rise following the lifting of the ban, have started holding back their stocks.

``Last year after the restrictions were lifted prices of groundnuts soared upto Rs 475 for 20 kgs. Obviously, they will now expect the prices to rise substantially which justifies the hoarding of stocks,'' informed a marketyard member.