Pepper Traders Call For A Review Of Credit Facilities

The pepper trade community has urged the Reserve Bank of India (RBI) governor to completely review credit availability to the traders.

This is significant as prices have zoomed in recent months and provide an opportunity to spice traders to cash in on the demand in export markets. In advocating such a fresh approach to the credit problems, India Pepper and Spice Trade Association (IPSTA) has thrown light on the following points:

* As pepper production is seasonal and marketing is a round-the-year process, exporters and traders find it essential to build inventory and carry stocks over a period of time.

 

* The high value of the commodity has imposed severe restraints on the capacity of exporters/traders to hold stocks because of inadequate credit

limits allowed to them by banks.

* The credit limits, like packing credit and FBP, which were sanctioned when the price of the commodity was around Rs 5,000 per quintal has still not been revised.

* IPSTA has emphasised banks should take into consideration the higher ruling prices, the larger volume of stocks required to be held and the increasing volume of trade while fixing the packing and FBP limits. The credit crunch is hurting the pepper economy by creating distortions in prices which operate to the detriment of the export trade.

As strict control over credit must continue to be exercised in order to contain inflation, it is equally important that the trade and industry be permitted adequate credit facilities to finance normal business activities and steady expansion in times of steep upsurge in prices.

Financial controls, and in particular credit limits, should be applied in ways which will permit trade and industry to obtain finance for proper fulfilment of their economic role.

A continued upsurge has been witnessed in exports of black pepper from India on account of the strong buying interest from overseas buyers, particularly from the US, who bought 5,871 mt in May 1997 alone.

Indian black pepper crop, during the current year, is estimated at 58,000 mt, out of which about 50 per cent, that is 29,700 mt has already been exported during the first five months of 1997.

However, the offtake in the domestic market has remained around 25,000 mt during the same period.

The stock position level, therefore, has gone down considerably and is responsible for the strong prices.

It is also reported that the Indonesian black pepper crop has suffered a setback, while production in Malaysia is at the same level as last year.

Imports of black pepper to the US during the first quarter of 1997 was 8,296 mt.

This is about the normal volume of imports for this period. But bulk of the volume was accounted by imports from India as the offerings from other countries was limited.

Due to new crop arrivals from Indonesia and Malaysia, and reports that major importers have comfortable inventory position, the prospects of the market firming up under pressure of renewed buying interest seems to be rather limited.

Continued enquires coupled with strong demand made black pepper prices maintain an upward trend during April and May. Prices of pepper in the Kochi spot market touched Rs 12,750 a quintal on May 31, 1997 against Rs 11,700 on May 2 and Rs 10,300 on April 1.

Pepper represents a prime example of the bright prospects for exports if successful measures are adopted to improve farm productivity.

For the purpose of achieving improvement in productivity and generating export surplus at competitive cost, an integrated spice development scheme has been rightly worked out and due priority is being given to it.

This includes supplies of quality planting programmes, field demonstration of crop care and plant protection.

Hitherto, the task of education, demonstration and infrastructural development had been considered as the state's responsibility.

However, in the context of economic liberlisation policy, the industry has an important role to play in boosting the tempo of growth through consultation and cooperation with the government agencies.

The productivity of black pepper in India is the lowest at 300 kg per hectare as against 530 kg in Indonesia, 525 kg in Brazil and 2,945 kg per hectare in Malaysia.

Reasons given for the low productivity in India are - non-intensive cropping in terms of number of vines planted per hectare, existence of uneconomic and senile vines, severe pest disease and unpredictable climatic pattern which discourages the growers to make necessary investment for maintenance and improvement of pepper cultivation.