The Hindu Business Line : Cashew industry seeks higher duty drawback rate

Cut in duty drawback facility coupled with high rupee appreciation will result in the companies making losses and that in turn would force them pull down the shutters or cut down production.

G. K. Nair

Kochi, Oct. 17 The cashew industry, disappointed by the Union Government’s decision to reduce the duty drawback rate, at a time when the rupee has been appreciating against the dollar, has urged the State government to take up the issue with the Union Commerce ministry.

The duty drawback rate, which has been raised to three per cent from one per cent following the steep appreciation of rupee against the dollar, has now been reduced to 1.5 per cent and at a time when the rate for textiles, coffee, tea, etc has been raised to five-eight per cent, Mr Baby Oommen, Vice-Chairman, Cashew Export Promotion Council told Business Line. The Union Government has reduced the rates with immediate effect through a notification on October 9, he said.

He said industry was entitled to three per cent of the value of goods exported as grant from the government under this scheme.

Import cost rise

Considering this facility the industry has been importing raw nuts, cost of which has also gone up. “We keep an inventory of raw nuts for five months to keep the factories running during lean seasons”, he said.

The high cost of production of late is due to 50 per cent increase in wages of workers; appreciation of rupee resulting in a drop in value realisation; and the reduction in duty draw back rate, which has steered the industry into making losses on the export front. This phenomenon has compelled the processor exporters to market their produce in the domestic market where the prices have been ruling above the international price, so as to avoid the losses, Mr Babu Oommen said.

Employment provider

Given the importance of this sector as a major employment provider to a large number of women belonging to the weaker section of the society both in Kerala and Tamil Nadu, the government should enhance the rate to at least five per cent, he said.

He said five lakh workers were employed in Kerala and an equal number in Tamil Nadu. Kerala’s Kollam district had the largest number with 3.5 lakh workers.

The factories in Kerala are using 90 per cent of imported raw nuts because of short supply from indigenous sources. At the national level, 50 per cent of the raw nuts requirements were met by imports, he said. The raw material price had also gone up as some of the exporting countries had resorted to market intervention exercise. Recently in Mozambique and Tanzania, the respective governments had fixed floor price for the raw nuts. Similarly, the prices in Indonesia had also gone up due to increased demand from Vietnam.

A major processor exporter in Kollam alleged that Kerala, where the cashew industry was concentrated, was being discriminated by not supporting this industry. Cut in duty draw back facility coupled with high rupee appreciation would result in the companies making losses and that in turn would force them pull down the shutters or cut down production. This would lead to loss of employment to thousands of workers, he warned.

Mr Babu Oommen said the Cashew Export Promotion Council had taken up the issue with the State Chief Minister and the Labour Minister for initiating urgent steps to rectify the situation.

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