Re rise hits cashew exporters

The country's cashew kernel exporters, who are facing severe competition from Vietnam in the global market, are in for more trouble. The exports from the country, which declined by around 3 per cent in the first five months in volume terms of the current fiscal, is likely to see drop in realisation following the appreciation of rupee.

The cashew export industry for the last few years is operating on wafer-thin margins. The appreciation of the rupee has therefore come as a bolt from the blue, a blow, which the exporters are finding hard to recover from. The exports have declined by 3.12 per cent to 49,390 metric tonnes during the first five months of the current fiscal compared to the same period last fiscal. In value terms, the exports have declined by 11.57 per cent to Rs 947.29 crore during the same period.

According to Walter D'Souza, chairman, Cashew Export Promotion Council of India (CEPCI), "Exporters are not able to confirm orders because of the poor realisation of value in rupees. Many exporters have stopped entering into new contracts. The international prices are also not improving and the average export value realised for cashew kernels has come down from Rs 203 per kg in January 2007 to Rs 189 per kg in July 2007".

He said exporters make forward sale of cashew kernels. Very few exporters have made export sales in the months of January-February, 2007 for April-December 2007. The Export contracts entered into were based on the then prevailing exchange rate of Rs 44.50 per dollar.

Since in the past, the dollar used to be stable, exporters have not covered the exchange risk. In the last nine months, the rupee has appreciated against US dollar by about 10 per cent.

"At present the Rs 40 per dollar level is factored into the cashew price from India. World prices have gone up 10 per cent from February 2007 almost neutralising the appreciation effect. Actually, the rupee appreciation will hurt producers of raw cashew in India and globally, if we are not able to improve our realisation of cashew kernels. This is because kernels are traded in dollar terms by all countries," said Giridhar Prabhu, convenor, India Cashew Federation and Mangalore-based exporter.

Exports from cashew kernels processed out of local raw nuts have become unviable by more than 11 per cent on account of the rupee appreciation. To make matters worse, other input costs like labour, packing material, interest on working capital, power have also gone up, D'Souza said.

The loss of exports will have serious implication on the employment opportunities as far as cashew is concerned. About 5 lakh workers (mainly women) from rural and semi urban areas and about 3 lakh small farmers of Kerala, Tamil Nadu, Karnataka, Goa, Maharashtra, Andhra Pradesh, and Orissa would be adversely affected.

With the appreciation of rupee, many cashew exporters are now trying to route their product to the domestic market, thanks to the good demand due to a boom in the retail sector in India. Though, the requirements are in much smaller quantities than the export consignments, there is a better price realisation at present, D'Souza said.

Meanwhile, the CEPCI has requested the government to increase the rate of duty draw back to 3 per cent or at least allow an additional 2 per cent DEPB (Duty entitlement passbook scheme) to those who have already claimed 1 per cent drawback in order to help the exporters utilise the assistance provided by the government to offset the rupee-appreciation fallout.