According to sources, around two dozen flour mills with its maida supply dedicated to Nestle have stopped production.
With the ban on Maggi noodles production in India continuing, flour millers have started dumping maida into the market at a loss.
In the process, prices of maida have declined by Rs 2-3 a kg to Rs 16-19 a kg in the vicinity of Nestle factories across the country.
Following the nationwide ban on Maggi sales, flour millers lifted maida already supplied to Nestle to divert the quantity to other competing buyers including regional noodle and bread makers.
Because of the differentiation in quality and the huge stock available with them, flour millers have started dumping maida into the open market to dispose of the quantity before it absorbs moisture due to ongoing rainfalls across the country.
According to trade sources, around two dozen flour mills with its maida supply dedicated to Nestle have stopped production.
Others with such specific maida production line-up have also closed down the machines.
Agri commodities are moisture-sensitive. Rice, flour and maida absorb moisture in case they are not stored in dry conditions.
Proximity of moisture determines the quality and durability of maida and flour. Fearing quality deterioration, flour mills have started selling maida at a loss of Rs 1.50-2 a kg in wholesale markets.
“We have lifted our entire quantity of maida from Nestle’s storages and started selling to other noodle and bread markers. Since the entire quantity is unlikely to be consumed by these noodle and bread makers, we have supplied a large quantity into the open market and have started selling to biscuits manufacturers at a loss of Rs 1.50 a kg,” said D Manikchand, managing director, Panchaganga Roller Flour Mills, a Kolhapur-based flour mill, which has been supplying maida to Nestle for nearly 18 years.
Of its 50 tonnes of daily production, Panchaganga Roller Flour Mills used to supply over 25 tonnes to Nestle’s. Other mills, according to trade sources, have also started lifting maida supplied to Nestle, for selling to other competing players.
While the exact volume of Nestle’s maida consumption could not be ascertained, a large number of players that had set up separate production lines specifically for this company, got hit badly.
Since quality requirement for Nestle was different from that of other players in the field, flour millers had set up separate production lines for this company.
“We have reduced our grinding capacity by 50 per cent, equivalent to the quantity supplied to Nestle. By the time we find new buyers, we will continue to incur losses,” said Manikchand.
Other flour millers have also reduced production capacity in tune with demand from noodle, bread and biscuits makers.
“Maida supply is a localised business. Flour mills situated in 200 km vicinity and relying heavily on supply to Nestle’s Maggi plant were affected badly. All other food factories have become over-cautious. They are re-visiting their suppliers and quality specification of raw materials closely. Maggi ban has a damping affect certainly. But, because of the availability of substitutes, the ban did not have a damaging effect,” said Ajay Goyal, managing director, Shivaji Roller Flour Mills.
While in some states monosodium glutamate and lead levels in Maggi tested negative, Nestle continues to faces ban on its production and distribution as tests proved positive in other states.
“Production is definitely disrupted. But Maida suppliers were not very comfortable with Nestle due to spurt in the cost of production in the past few months,” said Veena Sharma, executive secretary, Roller Flour Millers Federation of India.
Wheat prices have fallen three per cent since the last week of May to Rs 1,486 a quintal for delivery in July on National Commodity & Derivatives Exchange owing to subdued demand.
Maggi ban fallout
Makers start dumping the commodity into market with a loss
Maida price down Rs 2-3 a kg, around two dozen mills with dedicated supply to Nestle shut down, others close such machines
Sell that with a loss of 1.50 a kg to biscuits, bread and other noodles makers
Around two dozen dedicated mills down, others close maida manufacturing facility
Wheat price falls 3% in three weeks on subdued demand
