DGFT amends cashew EoUs and SEZ units from MIP, irks industry

NEW DELHI : The Centre has amended the import policy for raw cashew nuts exempting export-oriented units and processing units operating from the Special Economic Zones (SEZ) from the minimum import price (MIP) norm. Reacting to this the industry opined that the policy amendment would be detrimental to the domestic players as it would open up imports from cheaper producers.

The Director-General of Foreign Trade (DGFT), in a notification issued on Tuesday, said the MIP on cashew kernel brokens and whole nuts will not be applicable for imports by 100 per cent export-oriented units and units in the SEZs, subject to the condition that the imported cashew kernels are not sold in the domestic tariff area (DTA).

Cashew kernels and brokens imports are in the prohibited category list However, the imports are free if the cost, insurance and freight (CIF) value is above ₹680 per kg for cashew kernel brokens and above ₹720 per kg for cashew kernel whole. The MIP conditions, however, shall not be applicable for imports by 100 per cent EoUs and units in the SEZ. The SEZs and EoU units shall not be allowed to sell the imported cashew kernels in the domestic tariff area (DTA), the DGFT notification said.

P Sundaram, Chairman, Cashew Export Promotion Council of India (CEPCI), said the domestic market will be flooded with produce from competing countries which may finally lead to the closure of cashew processing units in the country. Already, the domestic industry is facing a subdued demand and the MIP notification will further hit the market, Sundaram said.

RK Bhoodes, former chairman CEPCI, said the decision would be detrimental to the domestic cashew industry as it paves the way for under-valued imports through SEZs.

“With the current notification, the MIP is again made not applicable to SEZ, which in other words makes import of broken kernels through SEZ and its subsequent sales in the Indian market made easy. SEZ units can now import kernels at much lower prices than the Indian prices and export it at relatively lower prices even after value-addition under the Indian label. A genuine exporter from India cannot compete with such SEZ exports,” he said.

He pointed out that it was with great efforts that the industry could get MIP imposed on imports of cashew kernels, which almost curbed the unethical and under-valued import of kernels. Later, the sector could increase the MIP to ₹720/680 for wholes/ brokens respectively.

There are widespread reports that SEZ units import large volumes of broken kernels a mix of high percentage brokens with less wholes and misdeclares them wholes kernels. The SEZ Act permits movement of such imported goods to domestic tariff area for job work. Under the guise of job work, the imported broken are moved out of SEZ and sold in the domestic market. In lieu of that wholes cashews brought from domestic markets are exported to fulfil export obligation, Bhoodes said.

If MIP is made applicable to SEZ units, they have to import at a price above ₹720 per kg and should export with value addition of 20 per cent which is not practically possible. Now with no MIP, they can import broken at low prices and it enables them to export wholes at market prices. This will, in turn, increase mis-declared imports of broken kernels into the country. Initially when MIP was introduced in cashew kernels, SEZs and EOUs were covered, he said.

The export of cashew kernel in the first nine months of the current fiscal was down 37 per cent at 38,305 tonnes compared with 60,843 tonnes in the same period last year.

In rupee value terms, exports were down by 22 per cent at ₹1,987 crore compared with ₹2,537 crore in the year-ago period. Shipments were valued at $249 million for the April-December 2022-23, down 27 per cent over $341 million in the year-ago period.