In a setback to the domestic spices-based high value added products industry, a host of companies are planning to set up new units in South East Asia region and in China. Already two leading oleoresin manufacturers, Synthite Industries and Plant Lipids had started their units in China and in Sri Lanka, respectively. More producers of oleoresins and oils, like Arjuna Natural Extracts and A K Flavours are in the bee line to start units in South East Asian countries.
To cap the climax state governments are proposing to introduce new taxes under the Bio-diversity Act, which will be counter productive to the industry, said top brass of leading companies. Imposition of fresh taxes will have far reaching consequences on the industry, said George Paul, managing director of Kochi-based Synthite Industries. The new proposals are targeted to protect the bio-diversity of the Western Ghats, where most of the spices, especially used for value addition purpose, are grown. Kerala plans to introduce 3-4% purchase tax and 1% turn over tax under the act. Though this is not introduced so far, the state government held discussions with the stake holders of the industry.
According to experts a trend had been set to shift focus on other major spice producing countries since raw material availability and lower price tags attract them to countries like China, Vietnam, Sri Lanka, Indonesia, Cambodia and Myanmar. The fresh taxation may force more companies to start units in other countries since they offer incentives like tax holidays.
Synthite has started a paprika-based extracting unit in China and Plant Lipids opened a pepper-based unit in Sri Lanka. Facilities offered by these countries are lucrative to Indian companies. India command roughly 65 % of the total global market of oleoresin, spice oils etc, but currently on a diminishing trend.
According to N Emmanuel, a leading expert in India production of spices, there's a diminishing trend and quality cannot be ensured every time. Compared to other origins of spices, India offers the highest prices across the globe.
George Paul said that in the case of paprika, productivity is high in China, hence price is low. Indian companies cannot compete with the Chinese as price is too low there. "Our market share in paprika has gone down around 25%. So we moved to China," George Paul said.
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In the case of China cost of manufacturing is low by 25-30% on an average, hence it is advantageous in the global markets.
P K Kunjachan, managing director of Arjuna Natural Extracts, a leading manufacturer of turmeric based products, said that the company is seriously planning to set up a turmeric-based extraction plant either in Indonesia or in Vietnam or in Myanmar, where turmeric is cheap and abundantly available. These countries offer EPZ space and 5-10 year tax holiday to attract companies. While the tax proposals under the Bio-Deversity Act is hostile to the industry in India. State government's plan to impose 3-4% purchase tax and 1% turn over tax under the act which literally make the survival difficult, he said. "So we are very serious on moving to other countries, We have two units in India. Naturally production here will come to a halt," he said.
A Mumbai-based analyst told Business Standard that higher productivity and low price attract Indian spice ingredient makers to move on to South East Asia. While India produces around 70 various spices, countries like Vietnam and Indonesia focus on 5-6 items. While India produce spices in small and medium holdings, other countries produces in large plantations. This make them cost advantageous, hence lower prices, he added.
India exported 11,475 tonnes of oils and oleoresins valued at Rs 1,911 crore during 2014-15. On the quantity front increase was just 1% compared to the previous financial year.