India’s cashew nut exporters are facing a tough time due to multiple factors that include higher input costs, shrinking sources and trade barriers in exporting to China.

India is the world’s largest producer of cashew nuts and is known as a source of good quality cashew nuts. It was also the top exporter, but has now been replaced by Vietnam, which is keen to increase its cashew nut exports from the current $2 billion (around Rs.12,500 crore).

Despite various incentives provided to cashew nut exporters in India, exports have remained low in the last few years. According to official sources, India’s cashew nut exports stood at around Rs.5,062 crore in FY2012-13, but it declined by around 20% to about Rs. 4,046 crore in FY2013-14.

While, production has grown slightly in India, demand has risen significantly due to higher income in India. Exporters say it is preferable to sell in the domestic market because the realisation is quick and assured.

As such there is a shortage of cashewnut for mills, and India’s imports, mostly from African countries, have remained steady in the recent years at around Rs.4,500 to Rs.5,500 crore per year. However, countries in Africa are planning value-addition and are eyeing direct exports of cashew nuts.

Meanwhile, input costs are increasing mainly due to increasing wages in Kerala, a prominent cashew nut exporting state in India. Earlier this month, the Kerala government decided to hike labour wages by around 35% for cashew nut labourers, a move that is expected to hurt exports in the coming months.

S. Sankaranarayanan of Swathy Enterprises, a prominent cashew nut exporter from Kerala, told The Dollar Business that cashew kernels exports was dominated by India, but cashew exports from Vietnam and Brazil has grown steadily with the help of increasing mechanisation. “Exporters in Vietnam offer cashew nuts at a competitive price compared to India due to lower wages, lower power charges and better trade policies.”

He added that the while it is good to see that the government is providing support for modernisation and mechanisation of cashewnut processing, it must ensure the welfare of labourers because the sector is a labour intensive one with over 95% comprising women.

Under such circumstances, increasing the acreage under cashew is needed to keep India at the top. However, tapping growing markets is also required. Industry sources say that China is perhaps the most promising market now and imported close to Rs. 2,000 crore from Vietnam.

However, Indians are unable to tap into the market due to trade barriers placed by China. According to Indian exporters, Indian cashew is of good quality and Chinese importers are interested to buy cashew from India as well, but import duty of around 5% diverts them to Vietnam.

Some Indian cashew exporting companies are increasing their presence in Vietnam in order to continue operations and to remain in the export market.

Source:- thedollarbusiness.com