Hike in minimum import price boosts domestic market for arecanut

The Centre’s decision, in January, to increase the minimum import price (MIP) for arecanut seems to be yielding results, as both white and red varieties of arecanut are seeing price increases.

The MIP hike and the paucity of water in arecanut growing areas are behind the price increase, according to stakeholders in the industry.

Suresh Bhandary, Managing Director of Campco, told BusinessLine the prices of both red and white arecanut moved up after the Directorate General of Foreign Trade (DGFT), in a notification dated January 17, increased the MIP from ₹162 to ₹251 a kg.

The price of old stocks of white arecanut, which was up to ₹255 a kg then, has now gone up to ₹270. The red variety has increased from ₹245 to ₹430 a kg.

The DGFT’s move to increase the landing cost of arecanut for importers has helped the domestic market, Bhandary said. The prices went up by ₹50-60 a kg within weeks after the increase in MIP in 2012, 2013 and 2015, he added.

Some industry participants said most Chinese companies prefer Indonesian arecanut, which is a wild crop in that country, for the production of mouth fresheners.

Recently, a Chinese company expressed interest in importing arecanut from India, but the prices acted as a deterrent. Farmers in India now get more in the domestic market than from exports to China.

Ravish Hegde, General Manager of the Sirsi, Karnataka-based Totagars’ Sales Society, said there is a decline of 20-25 per cent in the harvest of red arecanut in major growing regions such as Shivamogga and Davanagere.

While the import curbs have definitely helped in the price increase, the stress on water resources in the arecanut growing areas is also contributing, he said.

Subrahmanya Bhat, a farmer from Bantwal taluk, said the expansion of arecanut cultivation in the non-traditional areas has put stress on the available water resources. The paucity of water has led to a decline in production and arrivals of red arecanut to the market, consequently increasing the prices.

Compared to the red variety, white arecanut prices are yet to gain momentum, he added.

One of the factors behind the steady market is Campco’s decision to cap the purchase of arecanut post demonetisation, Bhandary said. The move helped stabilise the market and provide a better price to the commodity, he observed.

(Post-demonetisation, to prevent panic selling by growers, the cooperative had limited the purchase of arecanut from a member to ₹24,000 per week.)

Immediately after the note ban, some private traders had tried to bring down the price of the commodity. However, Campco’s cap had deterred it. In fact, the price of white arecanut went up by ₹5 a kg after that, Bhandary said.

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