Market price of arecanut up 21% after govt hikes MIP

DGFT increases MIP by more than 50% to Rs 251 a kg

Domestic growers of arecanut are saying that the government's decision to increase the minimum import price (MIP) of the commodity has already been factored into its selling price in the market. Industry representatives, however, say that the MIP is expected to increase further. The government's decision comes at a time when growers are facing pricing pressure due to cheap imports.

The  Director General of Foreign Trade (DGFT) in a notification said that the arecanut MIP will be increased to Rs 251 a kilogram from Rs 162.

The development comes in response to a demand by domestic arecanut cultivators to take stringent measures to control imports of the commodity into India. They say that the influx of imported arecanut into the domestic market has been systematically destabilising the home market, causing considerable distress to domestic farmers. 

Suresh Bhandary M, managing director, The Campco Ltd said that his organisation, along with other like-minded cooperatives, had submitted various representations to the Ministry of Commerce outlining the market situation. Following this, the ministry urged the DGFT to hike the MIP to Rs 251 per Kilogram from Rs 162.

This move would go a long way in curbing imports and boosting the morale of the  domestic areca farmers, as the arrival of new stock into the market has just commenced, Bhandary said.

He said that after the increase in MIP, the price of arecanut in the domestic market had increased to Rs 200 a kg from around Rs 165-170, which is a good sign. Bhandary expects it to cross Rs 220-230 in the coming days.

Despite all lthis, the price will not even match the production cost, which ranges between Rs 250 and Rs 337 a kg, depending on the variety and place.

At present, around 7,00,000 tonnes of arecanut are produced in India, while domestic demand is also more or less at the same level. Of the total demand around 70,000 tonnes are met through imported produce, which is cheaper than the domestically grown crop.

Most traders were importing the commodity from Indonesia, through Sri Lanka, by getting ‘Certificate of Origin’ from Sri Lanka, where some value addition and processing was being done. Imports from Sri Lanka attract zero per cent customs duty under the India-Sri Lanka FTA.

‘Rule of Origin’ was permitted under the FTA with a provision that the exporting country would have to add a minimum value  of 25 per cent to the merchandise.

India imported 67,824 tonnes of arecanut worth $159 million in 2015-16 as against 1,10,000 tonnes worth $229.96 million in 2014-15, according to Government data.

Production area was 4,41,000 hectares in 2011-12, and rose to 4,73,000 hectares in 2015-16, according to the Department of Agriculture, Government of India.