Stagnant prices push Palasa cashew units to shut shop

The stagnating prices of cashew kernel has forced around 60 per cent of the cashew processing units in Palasa, the biggest cashew manufacturing centre in the state, to down shutters for the last 15 days.

Even though the manufacturers enjoy the tax benefits after the implementation of value added tax (VAT), it doesn't seem to better things.

"Though there is a benefit of VAT, the stagnant prices of cashew kernel for the last two-and-a-half months has made the going tough for these units. Many processing units have suffered heavy losses and in order to avoid further losses, about 60 per cent of units located at Palasa have stopped operations," Malla Nooka Raju, president, Palasa Cashew Manufacturing Association, told Business Standard.

Before the implementation of VAT, the government used to collect eight per cent tax on purchase of cashew nuts. Now post-VAT, the government is no longer collecting the 8 per cent purchase tax. Instead, it is now collecting only one per cent as sales tax on sales of cashew kernels.

However, stagnation of cashew kernel prices and rising nuts prices are hampering the industry in the current season, he said. During the beginning of current season ie, middle of April, cashew nuts were available at Rs 3,400-3,500 per bag (each bag contains 80 kg of nuts).

The cashew kernel yield, at that time was about 21.5-22 kg on each bag of nuts and manufacturers were able to get Rs 100-250 on each kg of cashew kernels depending on the kernel size and quality.

But the rise in the nut prices to Rs 3,800-3,900 per bag along with a drop in kernel yield to 20 kg on each bag of nuts has kept the kernel prices stagnant, Raju explained. Even traders from Kerala, who depended on the Palasa market for both cashew nuts and kernel, have turned to the international market.

"Nut prices in the international market have dropped. Traders, therefore, are importing nuts and after processing, they are exporting kernels. This is also one of the reasons for stagnant prices in the Palasa market," he said.

Raju said that if the processing units continue their operations, manufacturers would lose around Rs 800 on each bag. All these have also led to a 40 per cent fall in roasting of nuts this season as compared to last season.

"In the first three months of last season, Palasa cashew operators roasted about 90,000 bags of nuts, but this season, in the same three months, they roasted only about 55,000 bags," he added.