The industry, in which India has a significant market share, is worth more than R2,500 crore annually. The industry is facing many challenges in India and the foremost is supply of spices. Production has not kept pace with demand and now we are slowly turning to being a net importer as our domestic consumption is growing robustly. Volatile production and prices have led to a situation of uncertainty which does not augur well for an industry that depends on long-term contracts, said Viju Jacob, director, Synthite Industries.
Synthite has more than 60% share of Indian oils and oleoresin exports and is operating a plant in China. It has started procurement centres in Vietnam and Indonesia too.
Most spices are available only in seasons. Since requirement is throughout the year, we have to buy and stock heavily in seasons, taking risk. The frequent price fluctuation in the commodity market poses high risk for stock, he said.
Another serious concern is the re-export time granted to processors. Processors can import spices but have to re-export them in value added form within 120 days or pay a duty of 70% of the import value. Processors are demanding extension of the time period to a realistic level, given the fact that availability of spices is dwindling in India.
Some trade experts see Indian companies shifting base to China to escape from the stringent pollution standards in India. Multinational processors turned to India in the 80s when the grinding industries faced action in the developed world due to the pollution problems. An Indian company recently shifted its marigold colour extraction plant from Tamil Nadu to China when the authorities objected to pollution, a leading spice exporter said.
The US and European markets have been passive in the last few years. Demand from the Asia-Pacific region is growing. But the higher cost factor in the processing stage is eating into margins.
The US is still the largest market for extracts, with 32% share of total exports followed by Germany (12%), UK (7%) and Korea (6%). Chilli and pepper oleoresins contribu-ted 80% of India's oleoresin export of 8,670 tonne, according to Spices Board data.
Turmeric, ginger, cardamom and others contributed the rest. India is now facing competition from China in chilli oleoresin. China produces mainly chilli oleoresins from the paprika variety, while India has the advantage of expertise in the whole range of spices.