Kerala to incur losses on pepper exports

Centre has granted just one-third of subsidy price

The Kerala Cooperative Marketing Federation (Marketfed) will incur a loss of over Rs 15 crore on exports of 4,800 tonne of pepper, procured by it, as the subsidy given by the

Centre is just one-third of that sought by the state, according to Oomen Chandy, chief minister of Kerala.

"We had sought an export subsidy of Rs 21 per kilogram as we had procured it (pepper) at Rs 75 a kg when the prevailing price was Rs 60-61 a kg, so as to support the growers. However, the Centre has just given us a subsidy of Rs 7 a kg," said Chandy. The government's subsidy includes Rs 5 per kg towards exports and Rs 2 towards freight.

He said the state has decided to go ahead with exports despite the loss it would incur as prevailing international prices are lower.

"The loss is likely to be over Rs 15 crore, though we are yet to assess the exact figure," Chandy said.

The price of Indian pepper in the international markets is currently almost on par with that of other origins. Vietnam is currently quoting $1,400 a tonne (that is Rs 64.2 a kg), while the Indian price is $1,425 a tonne (Rs 66 a kg), said Alex Mathew, an analyst with Kochi-based Geojit Securities.

Also with the price difference lowering over the last few months, traditional buyers of Indian black pepper such as Canada, Australia, Japan and the US have starting looking at it again, Mathew added. This is likely to boost demand for the Indian produce.

Though global output of pepper is seen 20 per cent lower in 2005 owing to bad weather in countries such as Vietnam, Sri Lanka and India, prices are seen down in the first quarter of calendar 2006, said Mathew.

"This is largely following huge carryover stocks from the last two years, producing about 3.5 lakh tonne each year against a global requirement of about 2 lakh tonne," he added.

In case of pepper, carryover stocks can be stored without any affect to quality for up to 3-10 years, traders said and thus, are crucial to price movements.

Further, following weak pepper prices for last two years, the crop in 2006 is likely to be further lower about 2-2.5 lakh tonne. And in wake of lower carryover by late 2006, global prices are likely to move upwards, Mathew said.