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  • Budget Jolt: Import Duty to Hit Cashew Industry Hard

    Mar 2nd, 2016

    The import duty imposed by the Union Budget on March 1 on the cashew industry will have a far-reaching impact on the sector that depends heavily on imported raw cashew.

    The sector which was enjoying import duty exemption for a while now has to pay `9.35 extra for every kilogram of cashew imported. It is a huge amount considering the fact that the country imports 9.5 lakh tons a year. Basic customs duty on cashew nuts in shell has been increased from nil to 5 per cent. Besides this, a 3 per cent on basic duty as education cess plus a 4 per cent special additional duty (SAD) will result in a total duty of 9.36 per cent for importers.

    Chairman of Cashew Export Promotion Council, P Sundaran, says that the import duty would adversely affect the industry. “We have lost the advantage of export duty drawback. The government should introduce enough incentives for exports to mitigate the impact,” he says. One of the suggestions is to make the Standard Input Output Norms (SION) applicable for food industry positive. It means that the value of output should be higher than the input (of raw material) for export consideration. According to Sundaran it is important considering the fact that only 60 per cent of the raw nuts imported can be used for exporting. With mechanisation the ratio of ‘brokens’ which has low export value has increased.

    The new duty structure will impact the small and medium cashew processors the most. “Most of the small factories are closed or on the verge of closure due to the high input cost. If we have to incur more cost it would be the last nail in the coffin,” said secretary of Kerala Cashew Processors and Exporters Association, K M Nazar. According to him, small processors have to depend on large exporters or traders to get export incentives. Around 600 factories provide work to 2.5 lakh in the sector.

    Listening to the Counterpoint

    The import restriction will result in dismantling the monopolistic practices by cashew traders who use free trade norms, says Sundaran. According to him only serious players will be involved in importing. According to the executive director and secretary, Cashew Export Promotion Council of India (CEPCI), Sasi Verma, the restriction will result in domestic production of cashew nuts. Only 7.5 lakh tons are produced domestically with a yield of 760 kg per hectare. “We can increase the productivity by incentivising farmers,” he said.