Are Indian cashew nuts going out of business?

Nearly 700 cashew factories have remained closed in Kerala for over 10 months, rendering around 1.5 lakh workers, mainly women, jobless.

Soaring input costs following a hike in wages have made it unviable to run the factories here.

Given this scenario, their reopening under the prevailing conditions is unlikely, P Sundaran, Chairman, Cashew Export Promotion Council of India, told BusinessLine.

The State government has hiked workers’ wages by 35 per cent with effect from March 1, 2015. The increase was done unscientifically, and, in effect, raised wages by around 40 per cent, he said.

“It will make the industry unviable. Already, we are facing a lot of problems. We are not averse to wage revision/increase, but it should be incremental, not steep,” said an industry insider.

Sundaran said that until a decade ago, 82 per cent of the nation’s cashew processing units were operating in Kerala and today this is down to just 23 per cent. The processing cost per 80-kg bag in Kerala comes to around ₹3,500, whereas it is in the range of ₹1,000-1,350 in other processing States.

The wage structure in Kerala is higher than in other States and in processing centres abroad, such as Vietnam, he added.

An unprecedented rise in the price of raw cashewnut — to around $2,250-2,300 a tonne — coupled with high processing costs has made the Indian product non-competitive, Sundaran said.

The landed cost of imported raw cashewnut comes to around ₹150 a kg.

The indigenously produced one costs around ₹140 a kg.

Government-owned/supported corporation/cooperatives running cashew factories, which employ only around 8 per cent of the workers, are also burdened by these factors. The state-owned factories may, however, absorb the losses as part of their social obligation, official sources pointed out. The private sector is hit harder by the losses.

Import dependent
Sundaran said about 40 per cent of the factories are running at present and the cost is averaged through mechanisation and the factories in other States. The industry, having a processing capacity of 20 lakh tonnes of raw nuts, is perpetually dependent on imports for over 50 per cent of its annual requirement, he added. The indigenous production of raw nuts mostly hovers at around 7 lakh tonnes. Exports fell to 6,26,192 tonnes, valued at ₹6,771.87 crore, during the April- December 2016 period, against 8,44,312 tonnes valued at ₹7,303 crore in the same period in 2015, said S Kannan, Executive Director and Secretary, CEPCI.