The Hindu Business Line : Pepper import ban: Oleoresin units likely to face raw material crunch

THE Centre's decision to ban import of pepper under the advance licence system is likely to result in problems for the oleoresin sector, which would be hard pressed for its raw material, light pepper, three months from now.

The industry has been importing the light berries required for extraction of oleoresin from abroad under the licences granted earlier and it might last for 3-4 months, Mr Sanjay Mariwala, Managing Director of Kancor Flavours and Extracts Ltd, told Business Line.

If the Government went ahead with the ban, it might force the industry, to look for various other options, including even shifting of the units to other producing countries, where the raw material is available at an affordable price, he said.

Another option left was to move the units into the special economic zones and operate as 100 per cent export-oriented units, he said.

Others in the industry said that some lobby with vested interests had managed to get the imports of pepper under advance licence banned by presenting themselves as the saviours of the farmers. They, in fact, want the domestic prices to be kept at higher levels and to make the Indian pepper uncompetitive in the international market. The prices of any commodity are determined by the demand and supply position.

Indian pepper was outpriced in the world market, they said. "May be some... who want to manipulate the market artificially, by influencing the policy of restrict imports and raising the domestic prices because they hold a `long' position," Mr Sanjay Mariwala said.

The reason often pointed out for seeking such restrictions was that the pepper growers were not getting remunerative prices for their produce.

A senior executive of a major pepper plantation company in the country said the cost for producing one kg of black pepper would come to around Rs 40 at the maximum for a corporate planter. While for others, it should range between Rs 35 and 40. In the country, almost all the farmers are growing pepper as an intercrop and there might be hardly any pure pepper plantation existent now.

In fact, the cost of pepper production does not seem to have been worked out by any of the agencies so far and "hence, without doing it scientifically how could one come to the inference that the prevailing prices are not remunerative," he asked.

He said the domestic market was strong and it could absorb around 60,000 tonnes of matured black pepper from the total estimated production of 65,000-70,000 tonnes.

Farmers here are not harvesting light berries as it fetched lesser price. Therefore, the oleoresin industry has to depend on imports for light pepper and for which Sri Lankan produce is preferred because of its high oil content. But, it does not have enough quantity and, hence, the industry had to import from Vietnam also, he said. The ban of imports would compel the industry now to look for more supplies from Sri Lanka and that, in turn, would push up the prices. In fact, imports from Sri Lanka under the free trade agreement are going unchecked and this imported commodity is entering the domestic market.

Total imports during the last fiscal stood at 17,725 tonnes valued at Rs 116.60 crore and around 60 per cent of it was by the oleoresin industry. In 2003-04, 14,334 tonnes valued at Rs 99.23 crore were imported.

Over 50 per cent of the exports earnings from spices oils and oleoresins come from pepper, industry sources said. Last fiscal, the total export of the value-added products stood at Rs 463.75 crore.

It is understood that the Spices Board has also recommended to the Union Commerce Ministry to lift the ban.

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