The Hindu Business Line : Pepper failure reflects poor commercial intelligence

PEPPER has been hot news for some time now. Domestic prices have been falling, but exports have refused to rise. Loud protests that low-priced imports are hurting domestic producers are heard from time to time. Reports of the Government moving in to restrict imports are doing the rounds.

Are promotional agencies such as the Kochi-based Spices Board barking up the wrong tree when they vehemently protest against imports from our Asian neighbours? It would seem so if one takes a close look at the market. There is also suspicion that the promotional bodies are protesting too much to mask their own failure to equip domestic growers to withstand international competition.

Without doubt, indigenous pepper prices have declined precipitously over the last year and are currently ruling about Rs 65,000 a tonne. In normal circumstances, such low prices ought to have encouraged larger exports from the country; but that is not the case now.

Pepper exports from India have declined steadily in recent years and a significant part of whatever is shipped out in the last two years is pepper imported duty-free against export obligation. For instance, during fiscal 2002-03, pepper exports were an estimated 20,000 tonnes and imports 15,000 tonnes.

Much of the import was for export purposes, which in other words means only a very small quantity - say, 5,000 tonnes - of indigenous crop was shipped out. This represents less than 10 per cent of domestic output for the year, while historically about 20-30 per cent of domestic output used to be exported.

It is clear that other origins, such as Vietnam, have overtaken India in pepper production and export. The once-famous Indian black pepper today stands out-priced and without adequate buying support. Vietnam is in a position to produce and export at low prices, and the quality of the origin is acceptable to international buyers.

The flow of Vietnamese pepper into a fastidious market such as the US is gathering pace rapidly. This should put to rest any uninformed talk of Vietnam supplying poor quality material.

What is Vietnam doing to raise production and export at low prices that India is not doing? This is the multi-million dollar question that must engage the attention of policymakers.

It is obvious, the Spices Board has failed to read market signals and take corrective measures in time. Gone are the days when Indian exporters would find ready market for black pepper irrespective of price. Indian commodity markets are increasingly integrating with global markets and are subject to the vagaries of the latter.

With the removal of quantitative restrictions on imports, our borders are open to goods from abroad. The challenge today is to become globally competitive. Global competitiveness may be defined as the ability to produce globally acceptable quality at globally comparable cost. But there is no evidence that the policymakers have this object even in the distant horizon as far as pepper is concerned.

The domestic pepper grower should be equipped to face competition from imported material. It would be an unwise and short-sighted policy to create an artificial insulation for pepper growers in the country by restricting imports through tariff and non-tariff barriers. Instead, programmes to raise production and productivity, reduce costs and increase consumption demand are needed. It may be necessary to examine whether the Spices Board is really equal to the task.

Importantly, the global market for pepper is undergoing changes. Increasingly, the market recognises and trades not specific origins but specific quality parameters. Growers and traders must take cognisance of emerging trends. Instead of resting on past laurels, all stakeholders must come together to resurrect the Indian black pepper.

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