Performance analysis of cashew processing industry in Kollam, Kerala

Abstract

The study entitled "Performance Analysis of Cashew Processing Industry in Kerala" was conducted during the academic year 2024-25. The main objectives of the study were to evaluate the performance of the cashew processing industry in Kerala, analyse the industry’s trade competitiveness in the global market, assess the industry’s impact on the social well-being of cashew labourers and identify the constraints faced by cashew processing firm owners and labourers. Kollam district, known as the “cashew capital of the world”, was purposively chosen for the study as it holds 89 per cent of the state’s cashew processing units. Both primary and secondary data were used for analysing the specific objectives of the study. Primary data were collected through a survey using well-structured and pretested schedules, covering 120 labourers and 40 cashew processing units. Secondary data were collected from various organisations and other authentic databases. The study analysed the performance of public and private cashew processing firms in raw cashewnut purchases, cashew kernel production, exports, turnover, and overall financial performance. Both public and private firms sourced larger quantities of raw cashew nuts from the global market because of the low domestic production. However, due to financial constraints, public firms imported smaller amounts compared to their private counterparts. Although public firms employed more registered labourers, they struggled to maintain year-round operations due to raw material shortages, leading to fewer working days. In contrast, private firms employed more temporary workers in addition to the registered labourers, invested more in mechanization and maintained higher production levels of cashew kernels. In marketing, public firms relied exclusively on the domestic market, while private firms operated in both domestic and global markets. Financial analysis revealed that private firms performed better, with higher turnover and profitability driven by efficient operations. Public firms, however, struggled with high operating costs and poor liquidity, resulting in consistent net losses despite generating gross profits. Cashew accounted for 4.39 per cent of India’s agricultural export earnings, with Kerala contributing 49 per cent of this share in 2023 (GoI, 2024 ; GoK, 2024). Given Kerala’s substantial role in India’s cashew exports, understanding the country’s overall export performance provides valuable insights into the state’s performance. The study analysed the trade competitiveness of India’s cashew industry, with focus on export performance and competitiveness across three distinct periods: Period I (1980–1994), Period II (1995–2010), and Period III (2011–2023). High export growth during Period I was driven by strong global demand and increased unit values, and this was supported by significant raw cashew nut imports from African countries. However, growth rates declined in Period II due to the emergence of Vietnam as a major competitor. The closure of several processing firms due to huge debt burden and high competition from other countries contributed to the negative growth rate of cashew export during Period III. Instability analysis revealed greater instability during Period I, but stability increased in the later periods. The Nominal Protection Coefficient (NPC) of 0.90 confirmed that India enjoyed a competitive advantage in global markets. Furthermore, the Revealed Comparative Advantage (RCA) and Revealed Symmetric Comparative Advantage (RSCA) values indicated that India maintained a comparative advantage in cashew kernel exports from 1980 to 2022. However, a declining trend in RCA after 2000 raised concerns about its long-term competitiveness in the global market. Cashew firms played a crucial role in the well-being and financial stability of labourers, with 44 per cent of labourers reporting that more than 75 per cent of their family income came from the industry. However, many labourers faced financial difficulties, as 50 per cent of them had annual household incomes below ₹1 lakh. The low income led to high indebtedness, with more than 90 per cent of labourers having loans between ₹50,000 and ₹1 lakh. The wage rates provided to labourers in private cashew firms were very low, often below the government-prescribed rates, creating a significant wage disparity between public and private firms. Cashew labourers faced significant challenges related to low wages, inadequate welfare benefits, and poor working conditions. Women made up the majority of the workforce in cashew firms but were largely assigned low-paying and physically demanding roles like shelling and peeling. In contrast, male workers, who typically handled roasting tasks, received higher monthly salaries, reflecting notable gender based wage disparities. Despite the availability of welfare benefits such as health schemes and paid leave, many labourers did not utilise these facilities due to stringent eligibility criteria, complicated processes, and lack of awareness. Public firm labourers were particularly disadvantaged, as reduced working days often made them ineligible for benefits like the ESI scheme. Many cashew firms failed to meet basic safety and hygiene standards, with labourers reporting inadequate facilities, such as lack of safety measures and a women-friendly working environment. The constraints of cashew firms’ owners and labourers were identified using Garrett ranking technique. The major constraints faced by the processing unit owners included high processing costs, competition from other cashew-producing nations, and difficulties in maintaining a steady supply of cashew kernels. On the other hand, the important constraints reported by the cashew labourers included irregular income, physical strain and health issues, and a high debt burden. The study concluded that, although the cashew processing industry in Kerala held significant economic potential, it had not yet reached its full capacity due to various challenges faced by both firm owners and labourers. The financial performance of both public and private firms was hindered by high processing costs, dependency on imported raw cashewnuts, and limited mechanisation. For laborers, low wages, irregular working days, and inadequate welfare benefits contributed to a high degree of financial instability. To address these issues, policy recommendations were proposed, focusing on raw material shortages, competitiveness, and labour welfare. To combat raw material shortages, the government was advised to encourage the domestic production of high yielding and improved varieties of cashews on underutilised or barren land by providing suitable incentives and ensuring their timely procurement. The government was also encouraged to provide financial assistance and facilitate the import of raw cashew nuts, particularly for public sector firms, where delays in prior bookings and release of funds often impeded procurement. Enhancing competitiveness required modernisation through financial support for upgrading machinery and diversifying markets, alongside investment in value-added products. Ensuring year-round operations for stable employment, simplifying access to welfare schemes, and mandating health insurance were essential steps to improve labour welfare. Additionally, enforcing fair wages, implementing safety standards, and adopting gender-sensitive policies helped to promote equity and protect workers' rights. Collectively, these initiatives would enhance the well-being of the workforce and strengthen the industry