Indian cashew industry needs to adopt best practices of the Vietnam sector

India is one of the largest producers and processors of cashew in the world. However, in the last decade, India’s cashew export dropped drastically from 43 per cent to 8 per cent. The decline has hurt the Indian cashew industry.

India’s price competitiveness does not match the price competitiveness of Vietnam in the export market. Vietnam has surpassed India in cashew export and captured India’s share in the export market. The country has made systematic efforts in the past two decades to empower its cashew industry that make them a global leader now.

Currently, Vietnam is the real competitor to the Indian cashew industry. The Indian cashew industry needs to bring in some of the best practices of the Vietnam industry to improve its performance. This is crucial for Maharashtra, in particular, as the State is the leading cashew producer in the country. Maharashtra Institution for Transformation (State NITI), in collaboration with Cashew Board Maharashtra supported by Maharashtra Cashew Processors Association, sent a delegation to Vietnam, to understand Vietnam’s success in cashew production, processing systems and export growth.

The delegation led by this writer included stakeholders, exporters, processors and farmers from Maharashtra. The visit provided valuable insights into increasing productivity, improving processing infrastructure, and enhancing value-added products, financing mechanism, export strategies. MITRA tries to bring best practices of Vietnam cashew industry into Maharashtra’s cashew industry to improve the cashew export and opening up new markets.

Findings and observations

1. Economies of scale through automation: Vietnam has gained economies of scale in cashew processing due to the implementation of high-end automation technologies and large-scale processing. In contrast, Maharashtra’s cashew processing units are small-scale and cottage in nature where economies of scale are not possible. In Maharashtra, biggest cashew processing plant is 20 tonne per day whereas in Vietnam is more than 200 tonnes per day .

2. Lower labour intensity: Vietnam’s highly mechanised processing systems operate with much fewer employees. For example, a 20-tonne capacity unit needs only 40 employees in Vietnam compared to the 300 employees in India, it saves significant amount of labour cost.

3. Availability of high technology gears: Vietnam is considered one of the world’s best manufacturers of high-quality cashew processing machinery and is easily available. India, however, has no indigenous state-of-art cashew machinery produced in the country and has to import them from Vietnam, which raises the costs.

4. Lower freight costs: Freight costs from Vietnam to major markets like the US are significantly lower than from India, giving Vietnam a competitive advantage in export logistics.

5. Competitive financing: Term loans for cashew manufacturing in Vietnam are available at 4-5 per cent interest with simplified documentation, compared to 9-10 per cent in India, making financing more accessible and affordable in Vietnam.

6. Average cashew grading: Vietnam largely exports mixed-graded cashew at an average price whereas India exports cashew with standard grading like W180 which is more costly in the international market compared to Vietnam average grade.

7. Value-added products: Now, Vietnam is focusing greatly on cashew value-added products like cashew butter. Vietnam and the US in joint ventures set up value-additional facilities in the country.

Strategies for Indian cashew industy

1. Expand plantation and increase production: Increasing cashew plantation areas and high-tech farming will improve domestic production that will lessen dependency on raw cashew nut imports.

2. Introduce automation and process on a larger scale: Promote the adoption of automated technologies and encourage the establishment of large-scale processing units to achieve economies of scale and improve efficiency.

3. Facilitate affordable financing: Introduce long-term loans with reduced interest rates and simplified documentation to support cashew processing units and enhance their competitiveness.

4. Focus on Middle East exports: Strengthen trade relations and concentrate export efforts on Middle Eastern markets, leveraging their high demand and proximity to reduce logistics costs.

5. Promote India’s cashew brand: Aggressively market India’s cashews globally, emphasising their superior quality and taste to establish a distinct brand identity in the international market.

6. Provide Taxation Support: Offer tax incentives and consultation to cashew processing units to reduce financial burdens and encourage sector growth.

7. APEDA scheme: The announcement of APEDA’s 40 per cent subsidy on machinery for the cashew industry is a step in the right direction. It provides an excellent incentive for entrepreneurs and manufacturers to invest in modern technology and scale up operation. This scheme has to promote effectively.

Conclusion

Vietnam’s cashew industry demonstrates exceptional export efficiency, with 95 per cent of its production geared toward international markets and domestic consumption accounting for less than 5 per cent. However, the sector is facing challenges such as raw material shortages as some of the African countries have started processing and curbing exports. With minimal domestic demand compounding the situation, several cashew processing units have shut down in recent years in Vietnam.

Consequently, Vietnam is slowly losing price competitive advantage over India in the international market. India has a window of opportunity as it ranks as one of the top cashew-consuming countries in the world, with strong domestic demand, an enormous raw material base, quality of cashew kernel and proximity to the Middle East market. States such as Maharashtra, which is the largest producer, have scope for further development. Therefore, the role of Cashew Board in the State is crucial and establishment of cashew board by the Maharashtra government is a strategic step in the long term. 

The author is Senior Advisor Board Member, APEDA, and Director, Cashew Board, Maharashtra