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  • Crisis in cashew sector intensifies

    Jan 19th, 2017

    Even as government-level talks are being carried out to reopen the private sector cashew factories that have been lying closed following the last minimum wage revision, the crisis in the sector is moving from bad to worse with banks declaring at least 60 cashew factories lying closed as non-performing assets and issuing notice to take possession of these properties. Sources in the sector said that private processors who received notices owed amounts ranging from Rs.5 crore to Rs.50 crore each to various banks. The owners of these factories had availed themselves of working capital loans from the banks to operate the factories. But following the wage hike, they had kept the factories closed on grounds that the operation could result in huge losses. The private sector was willing to agree for a 25 per cent hike in minimum wages. But the Industrial Relations Committee unilaterally declared and notified a 35 per cent hike. Subsequently, a 10 per duty on import of raw cashew nuts was imposed by the Central government and it made things all the more worse for the cashew sector. Cashew factory owners in the State said that the import duty and wage hike will make their product highly uncompetitive in the international and domestic markets. That is because cashew is now processed in at least six States where the cost of production is very low compared to Kerala vis-a-vis the last wage hike. Moreover, cashew processed in India encounters strong competition from Vietnam in the international kernel markets and already Vietnam has overtaken India as the biggest cashew kernel exporter globally. Following the wage hike and imposition of import duty, the cost of processing for processing one sack of raw nuts comprising 80 kg has touched almost Rs.4,000 in Kerala. Compared to this, the cost of production for the same used to be Rs.2,200 during the pre-minimum wage hike period. As of now, the cost of production in Tamil Nadu for the same is Rs.1,500 and in Karnataka where most factories are mechanised it is Rs.1,250. In Vietnam, the cost of production for a sack is less than Rs.1,000.