In a notification issued on few days ago, the Director-General of Foreign Trade (DGFT) stated that the MIP on cashew kernel brokens and whole nuts will not be applicable for imports by 100% export-oriented units and units in SEZs, provided that the imported cashew kernels are not sold in the domestic tariff area (DTA).
Imports of cashew kernels and broken nuts are prohibited. However, imports are free if the cost, insurance, and freight (CIF) value is greater than Rs 680 per kg for broken cashew kernels and greater than Rs 720 per kg for whole cashew kernels. The MIP conditions, however, will not apply to imports by 100% EoUs and units in the SEZ. According to the DGFT notification, SEZs and EoU units are not permitted to sell imported cashew kernels in the domestic tariff area (DTA).
According to P Sundaram, Chairman of the Cashew Export Promotion Council of India (CEPCI), the domestic market will be flooded with produce from competing countries, resulting in the closure of cashew processing units in the country. The domestic industry is already experiencing low demand, and the MIP notification will exacerbate the situation, according to Sundaram. Former CEPCI chairman RK Bhoodes stated that the decision would be detrimental to the domestic cashew industry because it would pave the way for undervalued imports via 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 in India and export them at even lower prices after value addition under the Indian label. A genuine Indian exporter cannot compete with such SEZ exports," he said. He emphasized that the industry worked hard to get MIP imposed on cashew kernel imports, which nearly stopped the unethical and undervalued import of kernels. Later, the sector could raise the MIP to Rs 720/680 for wholes and brokens.
There are widespread reports that SEZ units import large volumes of broken kernels a mix of high percentage brokens with less wholes and mis-declares them wholes kernels. The SEZ Act allows such imported goods to be moved to the domestic tariff zone for job work. The imported broken is moved out of the SEZ and sold in the domestic market under the guise of job work. In lieu of that, cashews imported from domestic markets are exported to meet export obligations, as per Bhoodes.
If MIP is made applicable to SEZ units, they must import at a price higher than Rs 720 per kg and export with a value addition of 20%, which is not feasible. With no MIP, they can now import broken at low prices and export wholes at market prices. As a result, the country will see an increase in mis-declared imports of broken kernels. SEZs and EOUs were initially covered when MIP was introduced in cashew kernels, he explained.
Cashew kernel exports fell 37% in the first nine months of the current fiscal year, to 38,305 tonnes, from 60,843 tonnes in the same period last year. Exports were 22% lower in rupee terms, at Rs 1,987 crore, compared to Rs 2,537 crore the previous year. Shipments were valued at $249 million for the April-December 2022-23 period, a decrease of 27% from $341 million in the previous year.
