Cashew nuts are among India’s top four agricultural exports, along with basmati rice, spices and tea. Data from the Cashew Export Promotion Council of India showed that India earned Rs 5,213 crores from the export of cashews and allied products in 2017. The port of Kochi in Kerala accounted for Rs 2,415 crores of these exports.

Kollam is the hub of the cashew industry in India. It has the most number of cashew processing units in the state too – of 824 units, 741 are in Kollam and the remainder are scattered across Thiruvananthapuram, Pathanamthitta and Alappuzha districts.

Kerala’s cashew factories have the capacity to process 17 lakh metric tonnes of raw cashews every year, according to the Cashew Export Promotion Council of India. As the state’s annual cashew production is just 7.5 lakh metric tonnes, factory owners import raw cashew nuts from African countries, mainly the Ivory Coast and Nigeria, to operate their units at full capacity.

Industry insiders say that the slump in the cashew industry began around 2016, starting with the imposition of a 9.4% import duty on raw cashews by the Union government during the budget that year. This hit cashew processing units hard. To add to their woes, the price of raw cashews increased from $800 per tonne to $1,800 per tonne in the international market in 2016. However, the price of processed cashews did not increase proportionately. The industry insiders say this could be attributed to the growth of the cashew processing industry in Vietnam, which is mechanised, unlike in Kerala, where it is manual.

“All these negative factors caused the decline of the cashew industry,” said I Nizamudeen, secretary of the Federation of Cashew Processors and Exporters, an organisation of cashew factory owners in the state. “No tax was charged on raw cashew imports till 2015. The duty was imposed to strangulate the MSMEs [Micro, Small and Medium Enterprises],” he said.

That was the time cashew unit owners started defaulting on loan repayment and the banks began to recover the loans with the help of the Sarfaesi Act.

Jacob Panicker, the regional head of the Federal Bank in Kollam, admitted that a large number of loans taken by businesspersons in the cashew industry were declared bad loans in the past two years. “It was an indicator of the trouble in the industry,” he said.

Nizamudeen suggested that banks could have helped by providing the industry with additional funds. “Bank officials put us in high esteem when we were doing good business, but they ignored us when we were in trouble,” said Nizamudeen. “Many factories could have revived if they pumped in additional funds.”

But bank officials said it was not practical to pour more money into loss-making units. Panicker said no financial institution would take such a risk. He also added that banks have been using the Sarfaesi Act to recover default loans since 2002. “We are not resorting to Sarfaesi Act the first time,” he said. “Banks have no options but to recover the loan amount.”

The Indian National Trade Union Congress President is now trying to bring awareness to the issue:

In last 6 months cashew factories in Kerala closed due to wrong policies of govts. The Industry provides job to over 3 lakh people in&around Kollam. Some people want to spoil this industry by imposing unnecessary compliance & formalities: Indian National Trade Union Congress Pres pic.twitter.com/Qc4USEQJOo

— ANI (@ANI) May 4, 2018