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Kerala's cashew industry sighs in relief as govt steps in to address crisis

Gireesh Babu/Chennai 09 Nov 18 | 11:45 AM

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In a breather to the ailing cashew processing industry in Kerala, the State government has decided to constitute a committee comprising bankers and government officials to look at the issues troubling the sector and come up with a revival plan. The committee would look into the issues each company is facing and suggest revival methods, said leaders of the joint action council formed by the cashew industry in the State.

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The cashew processing industry in Kerala, which has been facing crisis owing to higher wages, trade union issues and mounting non-performing assets (NPAs), had earlier sought a special package from the state government to help its revival. Almost 90 per cent of the over 865 factories in the state were closed down and around 2,500,000 of the total 3,00,000 workers went jobless as higher wages and increasing NPAs affected the operations of these units, which were producing almost 85 per cent of the country's cashew kernels ten years back. 

"This is a positive development for us. This will also help almost three lakh workers, mainly women, to save their livelihood. If the Centre also come up with a package to support the industry in the State, it would help us to come out from the crisis," said Rajesh K, convener of the Kerala Cashew Industry Protection Council (KCIPC), a joint action council of four organisations: The Federation of Cashew Processors and Exporters, Kerala Cashew Processors, Kollam Cashew Processors and Exporters and Kollam Cashew Guild.

The state government may also bear a portion of the interest the industry has to pay against their loans, to these financial institutions, he said. The government has also directed the banks not to take action against the loan defaults till December, this year.

The industry had earlier asked the government to look into issues related to higher wages and bonus and to introduce measures to bring down wage levels, which in turn would help the industry manage production and compete in the global market. Another major issue was strikes called by the trade unions without prior notice, which jeopardise production targets of processing units. These issues have resulted in mounting non-performing assets (NPAs) and closure of units. 

The Cashew Export Promotion Council of India (CEPCI) had earlier submitted a revival package for short, medium and long-term implementation to save the crisis-ridden industry. A decision by the state government in 2014 to increase the wages by an unprecedented 35 per cent has increased the cost of production to Rs 3,200-3,400 per bag of 80 kg, while in Vietnam, it is an equivalent of Rs 700 per bag or around $500, said Cashew Export Promotion Council Chairman R K Bhoodes earlier. The council also relies upon banks, central government and state government for extending support to the industry.   

The cost of production in Kerala is too high compared to other states. In other states, it is around Rs 1,000-1,800 a bag. The steep hike in wages a few years back went beyond the capacity of any industry member. In other states, the wage hike was in tandem with their capacity.

Besides, in other states, the industry was able to improve productivity by mechanisation and automation processes. This faced high resistance in Kerala. In the other states, the productivity multiplied by two to three times.

"We have developed a model under which the productivity will be doubled. This will bring the cost of production down to around Rs 1850 per bag compared to the current levels of Rs 3,400 per bag," said Bhoodes, earlier.

Considering that several companies have already shut their operations, for the revival package to work, the eroded working capital has to be converted into term loan or EMI basis and fresh working capital is required. The industry should also go for some mechanisation and automation processes, for which also it requires some investment. At a breakeven level, the cost has to be reduced to Rs 1300 level, to manage the loans, in a medium to long-term, recommended the CEPCI earlier.

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