Cashew industry cries foul over 5% customs duty

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Bangalore | Updated: March 23, 2016 1:06:10 AM

Sector has to pay total of 9.55% duty after addition of 4% special additional duty and 2% education cess

The imposition of a 5% basic customs duty on raw cashew nuts in Budget 2016-17 will adversely impact the industry, which is largely dependent on imported raw nuts, exporters said in Bengaluru. The sector has to pay a total of 9.55% duty when import duty is combined with special additional duty (SAD) of 4% and 2% education cess. As a result of the new duty structure, the cashew industry will incur an additional production cost of R55 per kg, which it will not be able to pass on to the consumer, the industry stakeholders said.

At an interactive session with commerce secretary Rita Teotia, organised by the Federation of Indian Exporters’ Organisation (FIEO) in Bengaluru on Tuesday, cashew exporters argued that most of the small factories are on the verge of closure due to high input cost.

Already, cashew-processing units are paying higher prices to farmers in the country to procure raw nuts. The new duty structure would result in their cost of processing going up further, Prakash Kalbavi, an exporter from Karnataka, said. India grows an estimated 6 lakh tonne of raw cashew nuts, while the processing industry imports 1 million tonne from African countries to meet the demands of the domestic market and maintain its position in the export market.

Kalbavi said small processors will have to shut shop as they cannot afford to pay duty and import raw cashew at higher cost. They can’t even pass on the burden to consumers or increase their prices in the international market, which is dominated by Vietnam.

“Any further rise in our prices will result in loss of market globally. Already, Vietnam has overtaken India in the global market with its competitive pricing,” Kalbavi said.

This is the first time that the cashew trade has been brought under the import duty regime, he said, adding that the new duty structure will result in further reduction of exports and loss of employment in the sector.

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