K. Sasi Varma, Exec. Director, Cashew Export Promotion Council of India |

India’s cashew trade is ideal – it imports cashew nuts, processes them, adds value and then exports the kernels. What, however, should be a cause for concern is the fact that export volumes have been stagnant for almost a decade. To make sense of what’s playing spoilsport and remedies to reinvigorate the industry, we spoke to K. Sasi Varma, Exec. Director, Cashew Export Promotion Council of India (CEPCI)

Interview by Satyapal Menon | The Dollar Business

 

TDB: On one hand, India is the second largest exporter of cashew kernel and on the other, it is a major importer of raw cashew nuts, despite being one of the biggest producers. Can you explain this paradox?

K. Sasi Varma (KSV): The reason for this is that domestic production is only about 8 lakh MT, i.e., about half of the country’s processing requirements of 16 lakh MT. When we process 16 lakh MT of raw nuts, the kernel yield is only about 23%, i.e., less than 4 lakh MT. Of this, about 1.5 to 2 lakh MT is being exported, while the rest goes to the domestic market, since the demand here is also quite high. In India, major cashew producing states are Maharashtra, Andhra Pradesh, Odisha and Kerala, in that order. Our imports are mainly from West and East African countries and to some extent, from Indonesia and Thailand.

TDB: What factors do you attribute to India’s inability to increase the output or the production of raw cashew nuts?

KSV: One of the main reasons for this is that there is no organised cashew cultivation in many places in the country. Farming itself is an issue since cashew is not a plantation crop, which means its farming is governed by agricultural land ceiling acts across states. So, an individual or an undivided family cannot hold more than a certain amount of land. Moreover, sentiments prevent our cultivators from cutting down old trees and plant new ones. As a result, our trees have become senile and their productive years are over, which has resulted in low yields. Although Indian scientists have developed the best varieties to suit different conditions, these scientific studies have not been fully assimilated by the farming community.

 

TDB: How is it that Vietnam – a late starter in this segment – has become the world’s biggest exporter of cashew kernel, while a traditional exporter like India is lagging behind?

KSV: Vietnam, which was taught cashew cultivation by Indians, has achieved a yield of 2,000 kg/hectare. According to experts, its yield can further go upto 3,000 kg/hectare, which is almost four times of India’s per hectare output of 750 kg. The reason for this is that the Vietnamese go for intensive cultivation. They plant 250-300 trees in one hectare. Moreover, they rotate old and new plants in such a way that when they are small, they can be accommodated within that space. They cut down old trees so that the remaining trees can grow. This is how they manage to get good yield.

The Directorate of Cashewnut and Cocoa Development (DCCD), whose mandate is to see that cashew cultivation is encouraged and production is increased, had predicted that we would be able to increase domestic cashew production to 20 lakh MT by 2020. But we are nowhere near that. We are still hovering around 8 lakh MT.

TDB: How true are reports that indicate that India’s cashew nut processing industry is suffering because of dwindling number of labourers?

KSV: Labour is now becoming a big issue because people do not want to work in cashew factories, since there are plenty of easier alternatives. Now mechanisation is fast catching up and the changeover to mechanisation, during the last four or five years, is probably more than all the developments that happened in the industry in the last 70-80 years. Processors are now shifting to automatic cutting machines and raw nut calibrators, which sort the nuts according to their sizes.

 

TDB: Can you give us an idea of the factors that drive cashew prices?

KSV: Pricing is mostly market driven, but it is now becoming an issue as raw nut prices are going through the roof. Vietnamese prices are 5-10 cents/pound less than that in India, which also acts in its favour when it comes to exports.

TDB: What do foreign buyers like in Indian cashew kernel? Is it the quality of the nut or is it the processing aspect?

KSV: Both quality and processing matter, but primarily it is the processing skill. Every step in processing requires expertise. You need to know how much to cook, how to cut and which one to cut. You also need to know at what temperature it should be done. Peeling has to be done properly. You have machines to do that, but they are not 100% efficient. Of course, you have automated machines in countries like Brazil. There the issue is that the quantity of ‘brokens’ is very high. If the ‘brokens’ percentage in India is, say, 15%, in Brazil it is 40%. Since nuts are roasted and salted in other countries, if there is anything wrong in the processing, you get what is called an uneven roast – one part will become dark brown and the other part will become light brown. The nuts need to be uniform to be roasted properly. There are small things we always have to be careful about. Expertise is also required in selection. You have different nuts in different seasons. First crop is always better than the second crop. In India, 65% of the processing, for both exports and domestic markets, is done in Kerala. Kerala has the skill to extract ‘whole’ kernel intact, which gets a better value in the market.

TDB: Is there a lack of government support to the cashew industry?

KSV: Yes, we could do with little more support. We find a lot of impediments while carrying on our business. For instance, we need to import raw nuts, which come via Tuticorin and Cochin ports. Tuticorin is always congested. So, getting out our cargo on time is an issue. On the other hand, the cost is very high at Cochin. Earlier, raw cashew containers were allowed to be imported and cleared without going through the container freight station (CFS). The customs department used to take random sampling to clear the cargo. Now, customs rule stipulates that every container has to pass through the CFS, which means added cost.

CEPCI has its own lab, with latest testing equipment, and is considered to be the best in South India. We had requested Ministry of Commerce to allow us to do inspections under Plant Quarantine (PQ), but the request was rejected. In terms of incentives, we have been allowed agri-infrastructure scrip, but it is useless, since it can be used only to import cold storage products, which cashew does not require. These scrips are not even salable.

TDB: Which market is more lucrative - domestic or exports?

KSV: Domestic markets are more lucrative. Domestic price is around 10-15% more than export price.

TDB: If domestic markets are more lucrative for cashew kernels, why export?

KSV: It is a difficult question to answer, because exports have their own benefits. The kind of dealings one has to do with the buyer is much easier in case of exports. In terms of volumes too, an importer might procure more than the local buyer. So, when it comes to bulk, the preference is exports.