For cashew exporters, foreign trade policy is a dampener

MANGALURU, APRIL 2:  

Cashew exporters view the new Foreign Trade Policy as a major blow to the industry. They feel the reduction of incentives available to cashew exports under Chapter 3 of the Foreign Trade Policy from 5 per cent to 2 per cent as the main reason for this.

Walter D’Souza, former president of the Cashew Export Promotion Council of India, told BusinessLine that scaling down of Chapter 3 benefits such as Vishesh Krishi Grameen Upaj Yojana (VKGUY) by 3 per cent under the new name of Merchandise Export from India Scheme (MEIS) will have far reaching repercussions on exports. 

Advantage Vietnam

Explaining this, K Prakash Rao of Kalbavi Cashews (an exporter from Mangaluru), said India has already lost the world’s largest cashew exporter tag to Vietnam.

Vietnam gained advantage from cheap labour and a jump in its raw cashew production.

Vietnam’s national average productivity of raw cashew nut is 2.1 tonnes a hectare against some 0.78 tonnes a hectare in India.

However, India had stayed put in global market because of the VKGUY benefit of 5 per cent.

“Markets are so competitive that every exporter in India factors this 5 per cent in his sale price and sells in the overseas market,” he said. D’Souza said that the scaling down of the VKGUY benefit had come into effect from April 1.

It is imperative that the earlier incentives are restored or at least continued until June 30, he said.

Export trades

Stating that most of the export trades take place three to six month in advance, B Rahul Kamath, President of Karnataka Cashew Manufacturers’ Association, said: “We would have made export commitments factoring 5 per cent benefits under Chapter 3. Overnight reduction in incentives cannot be factored, and exporters stand to lose heavily on the export commitments made by them.”

Prakash Rao said that by now most of the exporters have sold cashew kernels against this right up to October-November.

This sudden cut of 3 per cent will take the wind out of the exporters and may even result in many failing to keep their commitments. He said that 3 per cent drop in realisation will wipe out their working capital margin money and may result in upsetting the working of the industry this year.

Urging the Government to increase the benefits under MEIS for export of cashew kernels to 5 per cent, Kamath said this will go a long way in cherishing the ‘Make in India’ dream.

- The Hindu