Higher operational costs and tough competition from Vietnam is putting pressure on Indian cashew industry with many processors and exporters facing adverse credit profile, reports rating agency Icra.
Higher operational costs and tough competition from Vietnam is putting pressure on Indian cashew industry with many processors and exporters facing adverse credit profile, reports rating agency Icra. India produces 6-7 million tonne raw cashew per annum and was till recently the leading supplier of kernels to the global markets. The increasing cost of raw cashews imported from Western Africa and the higher processing charges in Kerala due to the relatively higher labor charges has compounded the problem.
Icra reports that while the Indian cashew exports recorded a marginal decline at a CAGR of 3% between CY2012 and CY2017, the exports from Vietnam grew at a CAGR of 10% during the same period. Lower cost of production aided by a higher degree of mechanisation and cheaper labour costs have aided the Vietnamese processors to become more competitive in the global market.
An Icra note says that the increasing market share of the Vietnamese processors and consequent pressure on realization’s has adversely impacted the credit profile of the Indian exporters, whose revenues and profitability have declined in the recent years.
R Srinivasan, assistant vice president and head, Mid-Corporate ratings, ICRA, said, “In the recent years, Vietnam has been gaining share at India’s expense in the export market, and the growth of the Indian processors is largely restricted to the domestic market. The government has protected domestic industry by way of 45% import duty on cashew kernels which has supported higher domestic price and resulting in Indian processors focusing increasingly on the domestic market.”
In terms of output, the world cashew kernel production, led by Vietnam and India, grew at a modest annual growth rate of 4% over the last five years driven by growing retail consumption by major consumers such as India, Europe and North America,Icra sources said.