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The Commerce and Agriculture Ministries have cleared the proposal.

Kochi , Aug 31

THE Union Ministries of Commerce and Agriculture have cleared the proposal for export subsidy on pepper and cardamom in a bid to raise exports of the commodities, besides arresting the fall in their prices in the domestic market.

The proposal is now with the Planning Commission for its concurrence, which is expected soon, according to Commerce Ministry sources.

The sources told Business Line that the proposed subsidy would cover costs such as local transportation, processing and export freight. Such a step is necessitated by a sharp fall in the prices of pepper and cardamom in the international market.

In order to arrest the drop in pepper prices, the Kerala Government, as a market intervention exercise last year, had procured around 4,800 tonnes of black pepper directly from the farmers at Rs 75 a kg. Meanwhile, the Spices Board had given a freight subsidy of Rs 45 a kg for cardamom shipped out by exporters.

The Kerala Government had appealed to the Union Government to extend 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 the farmers would get a remunerative price, Kerala Government sources said.

The State Government had procured black pepper directly from the growers through its agency the Co-operative Marketing Federation (Marketfed). If it releases the entire quantity in the domestic market at the prevailing price of Rs 56 - Rs 60 a kg it would not only land Marketfed in heavy loss but also lead to sharp fall in prices. Given this situation, the Government had decided to export the entire quantity.

But to make the price competitive in the international market where pepper prices are dwindling between Rs 55 - Rs 60, the Centre's subsidy support had become inevitable, they said.

Prices of black pepper quoted by Vietnam, the world's top producer with around one lakh tonnes at present, Brazil and Indonesia remain far below the Indian price.

The price difference has led to continuous decline in Indian pepper exports in recent years. Ever since new producers entered the world market, 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. The unit value also fell from Rs 206.73 a kg to Rs 86 a kg in 2004-05.

A similar situation prevails in cardamom exports too. The Indian produce is out-priced in the major world markets. Other producers are offering cardamom at prices much lower than that of the Indian produce. Exports from the country, which stood at 3,272 tonnes in 1985-86, gradually dropped to such a level that the shipments last fiscal were 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, sources 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".

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