Date:03/11/2005 URL: http://www.thehindubusinessline.com/2005/11/03/stories/2005110301571200.htm

Back Marketfed says pepper subsidy inadequate, fears Rs 13-cr loss

G.K. Nair

Kochi , Nov. 2

THE Kerala Cooperative Marketing Federation (Marketfed), which has procured 4,800 tonnes of black pepper at Rs 75 a kg directly from the growers so as to ensure a remunerative price to them, is likely to incur an estimated loss of Rs 13 crore as the subsidy announced by the Centre is less than one-third of the amount demanded by the State Government.

Speaking to Business Line, Mr P.P. Thankachan, Chairman, Marketfed, said the "subsidy announced is inadequate and the amount should have been Rs 22 a kg as suggested by the Spices Board." The federation would be approaching the Government demanding either to raise the subsidy or to recoup the loss to be incurred by it, he said.

The Centre has announced a subsidy of Rs 7 a kg, of which Rs 5 would be for exports and Rs 2 for transporting the commodity to the domestic market. The subsidy would be available for exports of 20,000 tonnes of exportable quality Indian black pepper till March 31, 2006.

According to Mr Thankachan, the cost of pepper procured at Rs 75 a kg by the Marketfed would come to around Rs 85 a kg for domestic sale when the weight loss and the garbling and cleaning cost are added. The world market price is ruling at around Rs 61a kg while the Indian parity is Rs 71 a kg. Thus, the difference in the cost of the produce and the international price would not be fully met by the subsidy and, hence, Marketfed would incur a loss of around Rs 13 crore, he claimed.

The Marketfed had taken a high-cost loan of Rs 36 crore for procuring the commodity and the daily interest it has to dole out comes to Rs 1.35 lakh, he said.

The Kerala Government had appealed to the Union Government to extend a subsidy of around Rs 22 a kg for exporting the pepper procured by it.

The Centre, in response, has now announced the subsidy, which it claims is WTO compatible and would make the Indian produce competitive in terms of price in the overseas markets. Besides, it would help regulate the supply, which in turn would arrest the fall in prices while the farmers would get a remunerative price. At this rate it is not going to help the growers, Mr Thankachan said.

According to reliable sources, the export price of the pepper procured by the Marketfed would come to Rs 99 a kg when cost of special processing, packing, stuffing etc are included, as against the Indian parity of Rs 71 a kg. And, there should be orders from overseas buyers to buy at this price, they pointed out.