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Saturday, Mar 23, 2002

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Cashew companies sneaking out

G.K. Nair

The major factors forcing the industry to shift its processing operations away from the State are high raw material price, more wages, high handling cost at Kochi port, purchase tax etc.

KOCHI, March 22

KERALA, the pioneer of cashew processing and exports, is slowly losing its premier position, as most of the major exporters are now getting the processing work done outside the State.

There are around 150 major processor-exporters registered with the Cashew Export Promotion Council of India. All of them have now factories in Tamil Nadu, Karnataka and Andhra Pradesh.

Though a majority of them have offices and processing units in and around Kollam, the cashew town, almost all of them get over 50 per cent of the processing work done in neighbouring States.

As against Kerala's 225 to 250 factories, Tamil Nadu has over 300 processing units, mainly in the Kanyakumari district, owned by the Kollam based companies, according to cashew industry sources.

Besides, factories have come up in Karnataka, Andhra Pradesh, Goa and Maharashtra.

The major factors forcing the industry to shift its processing operations away from the State are high raw material price, more wages, high handling cost at Kochi port, purchase tax etc, said Mr Anu S. Pillai, a Kollam-based major processor-exporter having factories outside Kerala.

The price of raw cashew nut, the raw material, is around Rs 32.50 per kg now, which is 10 per cent higher than that of the landed price of the imported raw nut. The price in other States was also much less.

India contributes about 60 per cent of the world cashew exports and to compete in the international market, "we have to be competitive and therefore the industry has to source the raw material at low prices,'' Mr Pillai said. The African cashew production had doubled in seven years and India is a major buyer. Similarly, raw cashew nut production is on the increase in other States, especially Maharashtra while it was on the decline in Kerala.

The labour component to the cost of production in Kerala used to be 25 to 30 per cent of the cost of production. In other States, it is much less. Besides, the Governments there support the industry with incentives, which are totally absent in Kerala.

The handling cost at the Kochi port is 50 per cent more than that of the Tuticurin port. "Even when we ship our products processed in Kanyakumari district via Tuticurin, we make a saving,'' Mr Pillai said.

The world cashew market is experiencing an oversupply position in recent years following the entry of new producers, especially Vietnam.

As a result, the unit value has dropped to Rs 185 per kg now from Rs 210 last year. Given this situation the industry has to look for cost advantage, he said. Of the six-lakh tonne processing capacity of the industry, more than half is now in other States.

The advantage in Karanataka is that there is no purchase tax for export while in Tamil Nadu, it is 4 per cent, whereas in Kerala it is more.

High raw material price coupled with the purchase tax raised the cost of raw cashew nut, Mr Pillai said.

The industry also faces "harassment" by the Sales Tax Department and ESI authorities in Kerala, some of the major processor-exporters alleged.

If the State remained impervious to these issues, the industry might slowly disappear from the State, rendering lakhs of workers, mostly rural women, jobless, they warned.

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