The Hindu Business Line : Export subsidy likely for pepper, cardamom

THE Union Commerce Ministry is likely to clear the export subsidy proposal for pepper and cardamom soon to increase exports and arrest fall in the domestic prices of these commodities.The Ministry is favourably considering the proposal and a final decision can be expected soon, sources told Business Line. The subsidy would cover costs such as local transportation, processing and export freight.

The Kerala Government is said to have demanded a subsidy of around Rs 20 a kg for exporting the pepper procured by it. The WTO-compatible subsidy would make the Indian produce competitive in terms of price in the overseas markets. Besides, it would help regulate the supply, which in turn would arrest the fall in prices while farmers would get a remunerative price, they said.

The State Government had procured around 4,800 tonnes of black pepper directly from growers through the Cooperative Marketing Federation (Marketfed) at Rs 75 a kg. If the agency releases the entire quantity in the domestic market at the prevailing price of Rs 56 - Rs 60 a kg that would not only land up the Marketfed in heavy loss but also lead to a sharp fall in the prices.

Given this situation the Government had decided to export the entire quantity.

Ever since the entry of new producers in the world market, the Indian exports of pepper had dropped gradually from 42,824 tonnes in 1999 - 2000 to 22,877 tonnes in 2001-02 and 16,635 tonnes in 2003-04 and 14,150 tonnes last fiscal. According to market sources, the Marketfed could sell the pepper to 100 per cent export-oriented processing units in the Special Economic Zones (SEZs) at the prevailing market price. These units could then process and undertake value-addition and export.

Similar situation is prevailing in cardamom exports also. The Indian produce is outpriced in major world markets. Other producers are offering cardamom at prices much lower than that of the Indian produce leading to sharp decline in exports.

Exports from the country, which stood at 3,272 tonnes in 1985-86 gradually dropped to such a level that the shipments last fiscal was 650 tonnes as against 757 tonnes the year before. Guatemala is said to be offering at almost half the Indian price in the international markets, they said.

The comparative freight advantage enjoyed by other producers coupled with the cost involved in quality improvement has to be compensated, they said adding, "this could be possible by extending WTO-compatible subsidy for exports of these commodities".

However, some traders here have questioned the logic behind the Indian Government subsidising these commodities to sell at prices lower than that of the domestic price to the overseas customers.

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Export subsidy likely for pepper, cardamom