Weak rupee hits raw cashew imports; Costly imports offset gains for exporters

KOCHI: The cashew industry has been hit by a fall in rupee value because nearly half of the raw cashew needed for processing is imported, mostly from African countries. This has nullified the advantages of a weak currency during exports, which touched Rs4,046 crore last year. To make matters worse, an increase in cashew kernel imports has led to an intense competition in the domestic market.

Cashew processor-exporters usually import raw nuts from Africa during the May-August period. The depreciation of the rupee will mean they have to shell out more for imports. "Many made forward bookings of export when the rupee was Rs54-55 a dollar expecting it to rise. So they did not book imports," said P Somarajan, proprietor of Kailas Cashews.
Though raw cashew prices have dropped to $800 per tonne from $1,000, quality has suffered. Total cashew nut production in the country is around 7 lakh tonne and an almost equal volume is imported as the number of processing units has gone up.
Cashew exporters have to clear the existing import backlogs in ports before applying for fresh imports.
This could nullify the gains in the export from the fall in rupee. "Indian export prices are currently slightly higher between $3.2 and $3.4 per pound compared with Vietnam and Brazil. Moreover, the demand from European Union countries continues to be slack," said Anu S Pillai, partner, Anu Cashews.
Meanwhile, imports of processed cashew kernels to India are continuing through under-invoicing, adversely affecting the prospects of the domestic cashew industry. Under-invoicing helps importers to sell the kernels at prices lower than the locally processed ones. The cashew industry has urged the government to raise the import duty from 35% to prevent such practices. "The government raised the import duty to 45% but the minimum value for imports has been lowered from Rs90 to Rs65-75 for different varieties,'' said Anu Pillai.
Cashew producers are planning to form an all-India level organization to raise the cashew output in the country to reduce the dependence on imports. Cashew cultivation has spread in Maharashtra, Andhra Pradesh, Orissa and West Bengal, though it has dropped in Kerala, which used to dominate the production in the country.

Source: India Time