Kerala’s cashew industry, the sole livelihood of around three lakh rural women, is pinning its hopes on a revival package supported by Central and State governments and banks, to weather the crisis it faces.
Out of the 824 factories, almost 700 are closed down and around 60 businesses already became NPAs. The sector was on a sound footing till 2010-11 but subsequently profitability eroded due to various reasons.
RK Bhoodes, Chairman, Cashew Export Promotion Council of India, cited competition from Vietnam on import of raw cashew nuts, increase in wages by the Kerala government, cut in export incentives, import duty, and surge in import prices of cashew kernels contributed to the slide.
Soaring input costs
According to him, working capital erosion was sparked by an abnormal increase in raw nut price. After 2014-15, processing in Kerala has become unviable and few processors have done partial mechanisation without term loans.
Raw cashewnut price during 2012-13 was ₹59.75/kg and in 2017-18, it stood at ₹134.39. In the case of kernels, in 2012-13 the price was at ₹404.20/kg and in 2017-18, it went up to ₹696.97.
Considering the increase in processing charges, the production cost has gone up steeply. against the price hike in cashew kernels. The processing charge in Kerala is hovering at ₹3,200-3,500 for an 80-kg bag, while in other States it is ranging from ₹2,200-2,400. In Vietnam, it is less than ₹700-750.
Available bank facilities have not increased inspite of the increased working capital requirements. The situation was more severe during 2017-18, when the raw nut price shot up by 27 per cent against just 8.45 per cent hike in kernel prices during the first three quarters. This has resulted in a sudden financial crunch that led the already ailing industry to an almost full closure, he said.
Since the raw nut procuring capacity is directly proportional to the cash availability, he said the price increase and limited bank facility posed a constraint to small processors for procuring and storing the raw nuts for off season.
CEPCI suggested that the crisis has to be addressed by framing short-, medium- and long-term solutions.
The Indian processing is heavily dependent on imports of raw cashew nuts from African countries. As the African nations encourage domestic processing of cashew nuts and envisage 50 per cent of raw cashew they produce to be processed domestically by 2025, our domestic production has to be augmented to reach 20 lakh tonnes by then.
For this, CEPCI has already submitted a roadmap to the government which aims to attain the target in three phases through pre-harvest management, area expansion, re-plantation.