The Hindu Business Line : Exporters find domestic cashew market lucrative

Crunching factors
The W320 cashew variety sells at around Rs 2,500 a tin in the domestic market but fetches only Rs 2,200 in the global market.
Consumption in the domestic market has increased because of lower prices of cashew kernels.

Mangalore June 18 The Mangalore-based Kalbavi Cashews is one of the prominent cashew manufacturers and exporters in the country. But these days, the company prefers to route its produce to the domestic market instead of trying to send it abroad, thanks to rupee appreciation and a booming retail market in India.

This is not a rare case. Many such exporters are finding the domestic cashew market lucrative than exports. Consider this: The W320 variety of cashew kernel, which is selling at around Rs 2,500 a tin (one tin is equal to 11.34 kg) in the domestic market, fetches only Rs 2,200 in the export market.

Mr K. Prakash Rao, Managing Partner of Kalbavi Cashews and President of the Karnataka Cashew Manufacturers' Association, told Business Line that kernels are fetching a far better realisation in the domestic segment on account of the retail boom in the country.

Consumption in the domestic market has increased because of lower prices of cashew kernels during the last two years. Added to this, many sweet manufacturers are using cashews in their products. He said there might not be any substantial rise in exports as in the past.

EXPORTERS AFFECTED

Mr Rao said cashew exporters were facing a crunch situation, as the global market rate for cashew didn't react to the rupee appreciation. "Brazil and Vietnam are the other two players where there is no change in their currencies. So India could not increase the rate on account of appreciation. Certainly, India has lost its competitive edge to the extent of 7 to 8 per cent in value terms on rupee appreciation," he said.

In Karnataka alone, it was 50 per cent towards export market and the rest for domestic market five years ago. In the last five years, the processing capacity has doubled. After that the ratio reached to around 60 per cent for exports and the rest for domestic.

"After the rupee appreciation, the situation may tilt towards 40 per cent for export and the remaining for domestic market," he said.

Asked if the exporters operate with fewer margin, Mr Rao pointed out: "We are now having very less margin or no margin in export alone. The cost of labour, packing material, fuel, and finance have gone up. This has made it difficult for exporters, putting them in a tight spot. There is no scope for reducing the cost other than by getting cheaper raw material.".

`Severe threat'

According to Mr Walter D'Souza, Chairman of Cashew Export Promotion Council of India (CEPCI), Indian cashew export margins are under severe threat due to aggressive price-competition from Vietnam, where wage levels are lower, and the Government there extends huge investment subsidies and incentives.

Mr D'Souza said the sharp appreciation of Indian rupee comes at a time when the sector was suddenly excluded from the benefits of Vishesh Krishi aur Gram Udyog Yojana, meant to promote rural employment.

DIVERSIFICATION

The Duty Entitlement Pass Book /drawback rates for cashew was also brought down from two per cent to one per cent, making it one of the least supported export products.

Mr Giridhar Prabhu, Proprietor Achal Industries (which produces speciality value-added cashew products), said his products were for a specialty market, and he traded in Europe. In his industry, he was probably the only person who traded in euro because of his specialty products. "Therefore, our pricing structure is different," he said.

G.K. Nair reports from Kochi: Due to adverse market conditions, many cashew factories in Kerala were closed for a good part of last year. .

The CEPCI, Mr D'Souza said, had requested the Centre to take timely action and re-instate incentives such as Vishesh Krushi aur Gram Udyog Yojana and extend to the cashew industry all the Schemes meant to promote labour-intensive industries in the interest of the huge work-force employed by the industry in Kerala, Tamil Nadu, Karnataka, Andhra Pradesh and other States.

Mr Walter D'Souza said he had held discussions with the Union Minister for Commerce & Industry, Mr Kamal Nath in New Delhi and impressed upon him about the need for governmental support to get relief from this problem at this crucial juncture.

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