The restructuring of foreign trade policy by scrapping incentive for value-added black pepper for developed countries and retaining it for such consignments to emerging markets have left the exporters crying foul.

This has resulted in increased exports to emerging markets like Vietnam, which is the largest producer of black pepper, at the expense of consignments to major buyers like the US and European countries. Under the new Merchandise Export from India Scheme (MEIS), the earlier 5 per cent export incentive available for value-added pepper has been withdrawn and replaced with 3 per cent incentive for raw pepper and 2 per cent benefit to value-added pepper to emerging markets.

In a letter to DGFT, Spices Board chairman A Jayathilak pointed out that since the US and Europe are the largest and traditional importers of spices, denial or reduction of incentives to these countries, particularly in the processed value-added form, will have an adverse impact on the Indian spice industry . He requested for retaining the 5 per cent-incentive for export to all countries.

"Ever since the policy came in to force in April, the export of pepper to Vietnam has gone up. This is re-exported by the country after processing. In other words, Vietnam has benefited from policy change in India and could be selling the popular Malabar pepper to the US," said Kishor Shamji, a leading exporter.

The letter also mentioned that this type of incentive is against the `Make in India' programme of the government and higher level of incentives are necessary as India is facing strict competition from low-cost countries like Vietnam, Sri Lanka and Indonesia.

All India Spices Exporters' Forum chairman Gulshan John said around 80 items under spices category have been affected as the incentives have been either reduced or withdrawn or raised illogically. "We are not sure how this discrepancy happened. We will give a representation to the government after studying the situation completely ," he said. The spurt in shipments and heavy domestic demand seem to have pushed up the pep per prices. Black pepper prices have jumped 6 per cent to Rs 610 per kg in the local market during the month.

Earlier forecast says though the earlier forecast says pepper production in the country is likely to double to 70,000 tonne in the current season, several growers in Kerala are not very confident. "Untimely rains have damaged the crop and our expectations have been belied," said a grower, Rajendra Prasad, from Idukki in Kerala.

Black pepper exports for nine months to December 2014, had shown 6 per cent drop in quantity and 20 per cent increase in value over the same period in the previous year at 14,500 tonne valued at Rs 784.96 crore.

Source:economictimes.indiatimes.com