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Why pepper prices shot up

Indian pepper prices have moved up by Rs 75 per kg in the past two weeks to Rs 450 per kg with the government imposing a minimum import price on the commodity, traders said. However, processors and exporters of pepper products alleged that the move would harm the trade and lead to shifting of units to countries like Sri Lanka. India is the largest consumer of pepper in the world and the second largest producer after Vietnam. The Union government approved the proposal of the state-run Spices Board as cheaper imports of pepper is seen putting pressure on the domestic market. Traders are also wary of higher imports into India via the FTA route and by means of under-invoicing. The All India Spices Exporters Forum (AISEF) said that the new move is not rational and would hurt the spices industry. “The notification speaks about minimum import price CIF to be Rs 500/kg ($7575/tonne), when today global market prices are trading at $3500-4200/tonne.There are many companies that earn foreign currency for the country by importing and re-exporting the pepper by means of value addition and help create jobs in this sector. Such business will be forced to close down,” Prakash Namboodiri, chairman of AISEF told FE. He said that higher import duty would have served the farmers interest better than the imposition of a minimum import price on all verities of pepper, as it would lead to a cost escalation even in the case of light pepper berries which are used only for extraction and not consumed domestically.

AISEF sources said that the customs have started penalising imported pepper and this would lead to a disruption in trade. Jojan Malayil of Bafna Enterprises expressed fears that the extractors, oil and oleo-resin industry would shift completely to other countries as they depend on imported pepper. AISEF sources said that the lower price of pepper in India is on account of global glut in production. “Pepper prices have been very high since 2006 and this has prompted farmers all over the globe to increase the production. Vietnam which used to produce about 80-90,000 tonne about 10 years back now produces more than 200,000 tonne now. Brazil which was at 30,000 tonne today produces 65,000 tonnes,” sources said. The Jakarta based International Pepper Community (IPC) projects the total world pepper production in 2018 at 4,45,150 tonne against 4,60,499 tonne in 2017. Indian pepper production is projected to improve in 2018 due to favourable weather conditions to 64,000 tonne by IPC.

Source: financialexpress.com

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