Chapter 4 PROBLEMS AND PROSPECTS OF SPICES TRADE IN KERALA

Chapter 4 PROBLEMS AND PROSPECTS OF SPICES TRADE IN KERALA From very early times, Kerala was famous for the cultivation of a number of major spices like pepper, cardamom, ginger and turmeric. In India, Kerala is the leading producer of black pepper and cardamom (small). These two spices are important in terms of export potential as well as domestic consumption. 80 per cent of black pepper and 77 per cent of cardamom production in the country is from Kerala. In addition, a number of other spices like nutmeg, mace, cloves and chillies are also grown in different parts of Kerala. However, the fortune of the spices trade in Kerala is largely dependent on the rise and fall of four major spices viz. black pepper, cardamom (small), ginger and turmeric. Trade liberalization in India posed unprecedented challenges to the country s spices trade in terms of price volatility. India has moved considerably towards opening up its market for spices and has liberalized the spice imports. Although the export volume of all spices from India has been increasing during the last decade, black pepper and cardamom (small) is facing stiff competition from other major producing countries like Vietnam (for pepper) and Guatemala (for cardamom). Indian pepper had a golden era during 1990 s with record export of 42820 MT in 1999, but afterwards it has been falling continuously. India s share in the world export of pepper was 18 per cent during 1995-96, but it declined to 6.9 per cent during 2004-06. Though India had prominent position in the production and export of black pepper, its position in recent years declined and now Vietnam tops in the production and

83 export of pepper. India at global level gets relegated to further lower levels and thus losing our big heritage of monopoly in the global pepper trade. Upto 1983, India had monopoly in the supply of cardamom to the world markets. But, towards the end of 1980 s India lost this monopoly to Guatemala - a Latin American country; and India could not since then regain the lost markets. During 1980 s the share of export of Indian cardamom in the total production was 53 per cent, but it dropped drastically to 8 per cent during 1990 s, and to 5 per cent during 2002-03 (Spice India, 2005). At the end of 2006-07, 97 per cent of the global market of cardamom was retained by Guatemala and the share of Indian cardamom was reduced to just 3 per cent. World production of cardamom is estimated at 42000 MT per annum of which the average annual production in Guatemala is 28000 to 30000 metric tonnes and that of India is 11000 to 12000 MT (Spice India, 2007). Thus, India and therefore Kerala also lost its past glory in the global cardamom trade. Until the beginning of the 21 st century, Kerala was the leading ginger producing state in India. Ginger was widely cultivated in various districts in Kerala. However, during the early 2000 s and thereafter, ginger cultivation in Kerala was confined mainly to Wynad district. But now even the Wynad based ginger growers have started shifting the ginger cultivation to Shimoga and Hassan districts in Karnataka state. Even the cultivation of Indian dry ginger popularly known as cochin ginger in the international spice market and which was well accepted the world over due to its low fibre content is becoming a history in Kerala, as its cultivation is not being found a viable proposition by ginger growers and traders, as there is not credible market, demand or price for it. Therefore, Karnataka has now emerged as the leading ginger producing state and Kerala lost its dominant edge in ginger cultivation also. Now Kerala s domestic market for ginger has opted for the import of Chinese ginger.

84 Traditionally turmeric grown in Kerala was very popular in the international spice market especially in the United States and Canada. Kerala turmeric popularly known as Alleppey finger turmeric because of its 5-5.5 per cent cur cumin content was in great demand by the extraction industry in foreign countries for many years especially during 1960-1980. However, due to the attractive prices of turmeric during 1975-90, other states like Tamil Nadu, Andrapradesh, Karnataka, Maharastra and Orissa made remarkable progress in turmeric cultivation. But, with the increase in the export demand for turmeric from India, turmeric production in Kerala did not increase. After 1990 turmeric cultivation became unattractive in Kerala due to its low selling prices. Many turmeric cultivators in Central Travancore and Malabar areas gave up turmeric cultivation and resorted to rubber cultivation. Kerala has now lost its dominant place in turmeric cultivation also. Similarly vanilla cultivation, which became wide spread in the spice growing areas in Kerala during 2001-06 ultimately, worked havoc on many spice growers. A clove, which is being largely cultivated in the Lilly regions of Kollam district, now faces the threat of imports from Indonesia, Zanzibar, Comoros and Madagascar. Thus, the spices trade in Kerala is facing a crisis. As Kerala is slowly losing its past glory in the production and export of many leading spices especially black pepper and cardamom (small), it is necessary to go deep into the problems and prospects of spices trade in Kerala. The general problems of spices trade, problems and prospects of black pepper and cardamom cultivation in Kerala are analysed below. 4.1 General Problems of Spices Trade Most spice producing and exporting countries are developing or least developed countries. Their constraints mainly arise from factors attributable to low levels of growth and development. Spices are considered as minor crops in most producing countries and therefore they don t get the attention they deserve in the national planning priorities. Spices are generally given low

85 priority in the research focus of developing countries. Absence of research has resulted in low productivity, high incidence of diseases and crop mismanagement. Spice sector is often characterised by unplanned production resulting in volatile markets with widely fluctuating prices. Unplanned production has made spice-producing countries into price followers rather than price settlers. Many exporters in the spice producing countries are not fully aware of the quality requirements of consuming countries and as a result, rejections of spice consignments and further negotiations on price adjustments are quite common in spices trade. Also, many exporters of developing countries do not have the capacity to meet the requirements for quality management systems that are being imposed in international markets. ISO 9000 certification and Hazard Analysis at Critical Control Points (HACCP) are becoming essential tools in the management of food-processing companies. Many spice producing countries do not have internationally acceptable quality assurance systems, quality upgrade facilities, grading and processing facilities and scientific ware housing and these results in low unit value realization. Many exporters are unable to have access to the right equipment for processing and cleaning spices, or even to use such equipment properly and on account of this, presence of extraneous matter becomes a major problem. Most spices are hygroscopic in nature and need specialized packaging; but packaging and transportation continue to be a constraint for producing countries. Marketing has been one of the weakest areas in many producing countries. Most producing countries follow either one or both of the following formulae: production minus consumption equals export or produce, consume and also try to export. In both situations the countries are neither price setters nor consistent exporters. Widely fluctuating prices and low prices have also affected the ability of spice producing countries to improve their performance.

86 Even countries that have paid serious attention to the major issues have been caught in this price situation. Spices are traditionally regarded as small cash crops and are tended by small and marginal farmers. Spices are cultivated mainly in small holdings, frequently as inter crops. Again, traditional planting methods are used and production is generally unplanned. Women are involved to a significant extent in spice growing and processing. While spices play an important role in rural sub-economies, the ability of the farmers to influence government decisions is limited. They continue to be adversely affected by the lack of investment, outof-date technology, limited research and development (R & D) and the absence of marketing expertise. While small farmers are able to spread their risks by cultivating different crops, they are at a disadvantage on the marketing front because of the small quantities they produce. This makes it impossible for them to exploit the market potential to the full. 4.2 Problems and Prospects of Black Pepper Cultivation in Kerala 4.2.1 Black Pepper Cultivation in Kerala From very ancient times Kerala or Malabar Coast was famous for the cultivation and export of black pepper. The trade names Malabar Garbled and Tellicherry Garbled symbolized an ancient tradition of quality black pepper produced in Kerala. It was the prosperity brought by black pepper cultivation that induced the migration of many agricultural families from different parts of Kerala to the pepper growing places in Wynad and Idukki districts. Leading pepper-producing areas like Tellicherry, Pulpally, Mullankolli, Poothadi, Sethamount and Kabanigiri in Wynad district and Santhanpara, Nedumkandam, Erattayar, Thoprankudy, Ezhukumvayal and Kattappana in Idukki district were once the pepper belts in Kerala. Pepper cultivators regarded these pepper belts as their parudeesas (or paradises). In these green hamlets, once the farming community thrived with the wealth accumulated from pepper cultivation. Farmers used to stock for long, dried

87 black pepper for purposes like marriage of daughters, education of children, construction of houses, purchase of additional land and for the repayment of loans. Attractive prices of black pepper up to 1999-2000 brought immense prosperity to pepper growers allover Kerala and the export of pepper from Kerala enjoyed a golden era during 1980-2000. In Kerala pepper is grown in all the districts. One can find a few pepper vines in most homesteads in the villages in Kerala. However, Idukki district leads in the production of pepper in Kerala followed by Wynad and Kollam districts. Table 4.1 shows the district-wise area and production of black pepper in Kerala. Table 4.1: District-wise Area and Production of Pepper in Kerala (Area in Hect., and prodn. in MT) District 1997-98 2002-03 2006-07 Area Production Area Production Area Production Thiruvananthapuram 5775 1377 5732 1307 6295 1450 Kollam 10170 3269 10360 3469 10873 3158 Pathanamthitta 4224 912 4264 1122 4919 1434 Alapuzha 1943 242 1902 236 1872 232 Kottayam 8499 777 9289 982 10418 1754 Idukki 57211 13629 73278 36764 83652 35299 Ernakulam 7002 906 7202 1110 6637 1133 Thrissur 3861 563 4662 748 5623 1006 Palakkad 4844 818 6964 1052 8362 1447 Malappuram 7885 914 8015 1024 9187 1114 Kozhikode 11869 1806 11659 1826 10652 1313 Wynad 44771 17332 39661 13262 36488 9828 Kannur 23301 3430 18601 2910 15068 3139 Kasargod 7051 1568 7021 1548 6657 1957 State total 198406 47543 208610 67360 216709 64264 Source: Spices statistics, Spices Board. Table 4.1 shows that Idukki, Wynad, Kollam and Kannur are the leading pepper producing districts in Kerala. During 1997-98, Wynad was the leading pepper producing district with 22 per cent of area under cultivation and 28.67 per cent of production. However, during 2006-07, Idukki emerged as the leading pepper producing district with 38.6 per cent of area and 55 per cent of

88 production and the share of Wynad district declined to 17 per cent of area and 15 per cent of production. Kollam accounted for 4.9 per cent and Kannur 4.88 per cent of pepper production. Pepper production in Wynad has shown a sharp decline of 43 per cent during 2006-07 compared to 1997-98. The decline in pepper production in Wynad is mainly due to the large-scale destruction of pepper vines by diseases and droughts in the leading pepper belts of the district and also because of the conversion of pepper growing lands for the cultivation of other crops. Thus, Idukki district now leads in black pepper production in Kerala with 55 per cent of production followed by Wynad with 15 per cent of production and Kollam with 4.9 per cent of production. 4.2.2 Black Pepper Crisis in Kerala In Kerala, black pepper has been in distress with the birth of the 21 st century. After the year 2000, prices started falling, production and productivity started stagnating and exports have been declining. Since 1999, when the domestic prices of pepper soared to an all time high of Rs.270 per kg during November 1999, there has been a steady dip in prices. During April 2002, the prices touched its nadir Rs.57 per kg, a steep fall from the astronomical heights. Thereafter the pepper prices remained below Rs.100 per kg up to 2006. The low prices made black pepper cultivation unremunerative and in attractive many pepper growers started neglecting or at least restricting further investment in pepper cultivation and started cultivation of other crops. The once pepper belts present a grim picture today. Recurring droughts and widespread quick wilt disease devastated pepper vines in many pepper belts and the downslide in pepper prices made the pepper belts a haunted haven. The entry of Vietnam as a competitor in the global pepper market made matters worse and India s dominant position in pepper trade

89 declined. Now a bumper pepper production in Vietnam is a nightmare for the pepper growers in Kerala. The pepper crisis is manifested through factors like dull economic activities in pepper growing areas, lack of interest in pepper cultivation among farmers, mounting agricultural debts of pepper growers, pepper growers and labourers shifting to alternative occupations and high suicide rate among the farmers in Wynad and Idukki districts. After 2000, in many pepper growing areas in Wynad and Idukki one could find retail shops being opened in the morning and being closed by 9am due to lack of sales, taxi jeep drivers returning homes without even a trip for the day, marriages arranged being cancelled or postponed and house constructions being halted. Mounting agricultural debts, extreme droughts and crash in the prices of black pepper drove many farmers to suicide. From 2002 to 2006, Wynad became a center of farmers suicide. Out of the 14000 farmers who committed suicide in India during the period 2003-2006, 300 were from Wynad and Idukki districts in Kerala and most of them were pepper cultivators. During 2000 to 2005 Wynad and Idukki topped the suicide table with a high average suicide rate of 46 per 1 lakh, while the state average was only 30 per 1 lakh. (The New Indian Express, February 19, 2005). In many households in the once pepper belts only aged parents and little children are now left, as most of the young and healthy ones have migrated to distant places and cities to make a living. A few years ago I used to employ at least three people daily in my five acre farm but now I have stopped cultivation of pepper, said Jose K.V, a native of Parakkavala in Wynad district, who now works as a supervisor in a construction company in Ernakulam for a meager salary. In many pepper-growing areas like Pulpally, Poothadi, Mullenkolli and Parakkavala in Wynad district and Vathikkudy, Thoprankudy, Erattayar and Ezhukumvayal in Idukki district pepper growers now prefer to cultivate banana and other short duration vegetable crops. Black pepper has now a very dubious

90 distinction as the yield of this crop has declined mainly due to minimum input use and declining profit. Pepper cultivation is no more a viable proposition before the farmers for a reasonable living. Owning big black pepper farms, once regarded as a sign of economic prosperity has now ceased to be so. According to M.S Swaminathan, a well-known agricultural scientist and the Chairman of the National Commission on Farmers, we can not live happily as islands, in a sea of misery. It is therefore necessary to enquire into the reasons for the pepper crisis and also the prospects of black pepper cultivation in Kerala. The important problems of pepper cultivation in Kerala include: i) Unremunerative Selling Price Even though the attractive prices of black pepper brought prosperity to the pepper cultivators during the period 1980-2000, the situation changed after 1999 as the prices started to fall. During November 1999, the selling price of pepper in Kerala reached Rs.270/ per kg. But it declined to Rs.201 per kg at the end of December 1999, Rs.164 per kg during 2000, and Rs.73 per kg during 2001. The price declined to a meagre Rs.57 per kg during April 2002. Then the prices remained in the range of Rs.65 per kg to Rs.95 per kg up to the beginning of 2006. Even though the prices increased beyond Rs.100 per kg after 2006, thereafter the prices remained between Rs.110 per kg and Rs.145 per kg. The low selling prices turned pepper cultivation in Kerala unprofitable and unattractive. The unremunerative price structure resulted in complacency among the farming community due to poor returns. Therefore, many pepper growers in Kerala started to neglect pepper vines. Unremunerative selling prices are the main problem in the pepper trade in Kerala now. The majority of the pepper and cardamom (small) growers in Kerala are small and marginal farmers. For them attractive prices are the best incentives to remain in the cultivation of these crops.

91 ii) Low Productivity The productivity of black pepper in Kerala as well as in India is the lowest compared to other pepper growing countries. According to the estimates of the IPC the area under black pepper production during 2006-07 was 505819 hectares accounting for 362160 tonnes with the average productivity level of 649 kg/hectare. In India, it is grown over an area of 216550 hectares (42.8% of the world area) producing 65000 tonnes (17.9% of world production) on an average annually. Table 4.2 shows the area, production and yield of pepper in major producing countries. Country Table 4.2: Area, Production and Yield of Pepper by Countries Area (ha) 1997-98 2002-03 2006-07 Product Product Product Yield Area Yield Area ion ion ion (kg/ha) (ha) (kg/ha) (ha) (MT) (MT) (MT) Yield (kg/ha) Brazil 47000 48000 1021 50000 50000 1000 45000 45000 1000 India 181530 57330 315 216550 65000 300 216550 62000 286 Indonesia 170000 78000 458 171000 80000 468 150000 55000 367 Malaysia 13000 20000 1538 13100 21000 1603 13000 20000 1538 Sri Lanka 31400 12200 388 31969 12660 396 32232 12020 373 Vietnam 48000 84000 1750 48800 85000 1742 50000 105000 2100 China 15500 31000 2000 17000 33000 1941 28400 35000 1232 Thailand 2700 9050 3358 2800 9500 3393 2800 9500 3393 Madagascar 3200 2100 656 4000 2500 625 4000 2500 625 Others 2900 3200 1103 3000 3500 1167 3000 4659 1553 Total 515230 860110 12587 558219 362160 649 544982 350679 643 Source: Spice India, July 2007. Table 4.2 reveals that though India still tops in area under pepper cultivation its productivity is almost static and is the lowest among the pepper producing countries in the world. During 2006-07 while the productivity of pepper in Vietnam was 2100 kg/hect and in Thailand 3393 kg/hect, it was only 286 kg/hect. in India. A Vietnamese pepper farmer has even recorded a bumper average yield of 15 tonnes per hectare, the highest ever in the world. The farmer named

92 Nguyen Van Queo belonging to the Central Highlands Gia Lai province of Vietnam explained that his technique included ensuring the distances between pepper trees to gain most sunshine and avoided pestilent insects. He also used organic fertilizers instead of chemical ones. (Spice India, August 2008). Among the pepper growing states in India productivity levels are high in Karnataka. During 2006-07 productivity of pepper in Karnataka was 577 kg/hect, while it was only 297 kg/hect in Kerala. Preponderance of old, senile, unproductive vines in large areas, absence of periodical replanting and nonadoption of available technologies are hampering the productivity demands. iii) Violent Fluctuations in the Pepper Prices Violent fluctuations occur in the prices of black pepper frequently. It is especially so after the globalisation of spices market. News about a shortage or delay in supplies from Brazil or Vietnam suddenly increases the prices of Indian pepper and news about over production in Vietnam or Indonesia suddenly brings down the prices. Prices of pepper sharply fluctuate over a weekly, monthly or quarterly basis. In Kerala, black pepper is predominantly a small (<0.5 acre) and medium (0.5 2.0 acres) growers crop and they constitute 80 per cent of the total number of pepper growers. Poor economic status and lack of resources are bottlenecks for this group to face violent fluctuations of price. As such negligence in management sets in when price structure declines. The primary survey in this connection also revealed that according to many pepper growers frequent fluctuations in the prices of pepper bely all their plans. Thus, price volatility adversely affects the growers in the event of depressed prices on one hand and jeopardizes the crop planning on the part of farmers on the other.

93 iv) Senile Plantations Most of the plantations of pepper and cardamom in Kerala are very old and have become senile. This results in low productivity and poor returns to the farmers. The only remedy to overcome this problem is to encourage pepper growers to replant their farms with high yielding varieties of pepper. The reduced profit margins and expected 4 to 5 years lag in fruit bearing with new plantation are hindering the planters from replanting. Also the availability of disease free planting material with reduced fruit bearing age would induce farmers for replanting in phased manner as higher gestation period deters the small and marginal farmers from going for replanting. v) Emergence of Global Spice Market Globalisation and trade liberalization has made the spice market a global market as different from the earlier local markets. As a result spice products can move from any producing country to any other place. Higher productivity and low cost of production only will capture the global markets. When the news about a likely fall in the production of any spice (say pepper in Vietnam) comes enquiries for Indian pepper increase and the Indian exporters will be in a position to quote more. The players in the futures markets also become active during this time. The increase in foreign orders combined with the active speculation in the futures will result in increase in the prices of spices. During 2002, due to a drought, pepper production in Vietnam fell from 55000 tonnes to 44000 tonnes, and the prices of Indian pepper increased from Rs.67 per kg to Rs.100 per kg during April 2002. Also, during August-September 2006, due to a fall in the supply of pepper from Brazil and Indonesia, the prices of Indian pepper shot up from a mere Rs.67 per kg at the end of June 2006, to Rs.137 per kg during September 2006. Thus Indian pepper exports warms up when global supplies fall.

94 vi) Droughts, Incessant Rains and Diseases of Pepper Plants and Support Trees Weather conditions in the leading pepper growing areas in Kerala are changing. During certain years there are severe droughts and no rains at the normal periods. Sometimes there are untimely rains and sometimes-incessant rains. Erratic weather conditions affect the production of black pepper. In the spices districts of Wynad and Idukki, pepper output has come down by 40 per cent in various places due to erratic weather and quick wilt disease. Many pepper growers in Idukki and Wynad said that during 2007 there was a 40 per cent drop in production from the crop of the previous year. The situation is also the same in several pepper-growing areas in Kollam district. Due to incessant rains during certain occasions pepper growers are not able to pluck the ripened berries. Incessant rains in Idukki district during the second week of March 2008 caused the loss of pepper worth lakhs of rupees. Incessant rains also affect the output of the succeeding years. To get good output during any succeeding season, pepper vines should remain exposed to strong sunshine at least for one month after every harvest. Therefore, rains before or after harvesting will adversely affect the next season s output. Droughts during certain years in the pepper growing areas have caused total destruction of pepper vines. The severe drought in Wynad district during 2003 brought down the area under production in Wynad from 41573 hectares during 2004-05 to 40580 hectares during 2006-07. The quick wilt disease destroyed more than half of pepper cultivation in the Mullenkolli and Pulpally Panchayats in Wynad district. The support tree widely used in pepper cultivation is Erythrina Indica (Muriku). Of late this tree was widely deprecated by a number of insect pests such as borers, leaf folders, spittlebugs and the most devastating one recently recorded, is Erythrina gall wasp. This problem has been felt by the pepper growers in Idukki district particularly in Chellarkovil, Kungiripetty and

95 Myladumpara villages and in Kattappana, Nedumkandam and Vathikudy Panchayats. Thus, droughts, untimely rains, and diseases of pepper vines and support trees have brought drown the area, production and productivity of black pepper in Kerala. vii) Low Wages for Workers, Low Margin for Cultivators and Consequent Lack of Interest in Pepper Cultivation The low wage rates prevailing in the pepper growing areas are an important reason for lack of interest among agricultural workers in pepper plantations and cardamom plantations. In Vathikudy and Konnathady Panchayats in Idukki district the average daily wages for male workers is Rs.120/- only and for female workers Rs.100/- only for pepper growing related works. In the cardamom plantations in Kumaly, Peermade and Vandiperiyar Panchayats, the wage rate for males vary between Rs.100 and Rs.125 and for females Rs.90 and 110. Such low wage rates make the manual work in pepper and cardamom plantations inattractive and the labourers seek alternative works in other areas like rubber plantations, retail marketing sector and small industries. The planters are also not happy with the wages, which according to them would be a burden on the management. Because of the low margin left for them due to poor selling prices of pepper, they are not able to pay higher wages to workers. According to the Association of the Planters of Kerala (APK), while the earnings of the workers in the plantation industry should improve, but it has to be in tune with the growth of the industry and its long term sustenance. The survey conducted in this context also revealed that most pepper cultivators are of the opinion that they get only a small margin and that pepper cultivation is not profitable now because of which majority of the pepper growers are not interested in enlarging the area under cultivation or in making additional investments in pepper cultivation.

96 viii) Scarcity of Agricultural Labour and Migration of Agricultural Workers to Other Areas and Occupations A very crucial and recently emerged problem in pepper cultivation is the scarcity of agricultural labour. This problem has become acute especially after 2005. Sufficient agricultural workers are now not available in the spice growing areas in Kerala. Scarcity of agricultural labour has arisen due to reasons like migration of educated youths to nearby industrialized towns, cities and even other countries in search of salaried jobs, lack of interest in farming among the present generation youths, exodus of the Tamil workers in Kerala to their native places, decline in the number of children in most families and spread of higher education in rural areas. Again, many labourers in the pepper and cardamom plantations also shift to nearby rubber plantations, where they can make higher earnings. For example many plantation workers in Kumaly, Vandiperiyar and Peermade Panchayaths in Idukki district now go for working in the rubber plantations in Mundakkayam and Kanjirappally area in Kottayam district, where they can earn Rs.300 per day or even more. According to a study conducted by Prakash, B.A. (2008) on the farm crisis in Idukki district, as much as 79 per cent of the farmers covered by the study complained of labour shortage as the main problem faced by them. According to a farmer in Madikkeri in Wynad district in places like Wynad, the available labour is now deployed in coffee plantations which is giving us good return. Clove growers in the Kollam district in Kerala sometimes even bring workers as far as from Tuticorin for harvesting cloves. In the Cardamom auction centers at Bodinayakkanur acute labour shortage delays the dispatches of consignments to North Indian markets, which in turn also affect the flow of funds from upcountry markets.

97 ix) Import of Black Pepper to Kerala Even though Kerala was once well known all over the world for the production and export of various spices especially black pepper and cardamom, at present many spices like black pepper, cardamom (small), nutmeg and mace, ginger turmeric cassia, cloves, clove oil, cinnamon bark, cinnamon leaf and cassia are being imported to Kerala from several other producing countries. The main attraction in the import of such spices even when they already available in Kerala, is their price advantage. Black pepper is being imported to Kerala from countries like Sri Lanka, Vietnam, Indonesia, Equador Singapore, Thailand, Brazil, Netherlands, Malaysia and Madagascar. Such import of black pepper takes place in two ways. a) Duty free import as per the ISLFTA and b) Duty free imports for re-export after value addition under the Advance Licensing Scheme (ALS). The major ports from where pepper is imported to Kerala are Colombo, Hochimincity, Singapore, Panjgur, Rotterdam, Surabhaya, Bangkok, Santos, Tacoma, Belawana Ali and Belem. During 1997-98, Kerala imported 1822 tonnes of pepper. It raised to 16061 tonnes during 2006-07 i.e. an increase of 782 per cent (Table 4.3). Table 4.3: Import of Black Pepper to Kerala during the period of study Year Import of black pepper 1997-1998 1822 1998-1999 1929 1999-2000 3404 2000-2001 973 2001-2002 6218 2002-2003 15122 2003-2004 12800 2004-2005 16989 2005-2006 13851 2006-2007 16061 Total 82269 Source : Annual Reports, Cochin Chamber of Commerce.

98 As per the statistics of Spices Board, total import of black pepper to the country was 18770 tonnes during the year 2006-07, which means that the import of pepper to Kerala alone accounted for 85.5 per cent of total imports to the country. Black pepper is imported to Kerala mainly by the oils and oleoresin units in Kerala. India has 90 per cent share of the worlds pepper oleoresin business. There are eight active operational oleoresin industrial units in Kerala, which annually require 5000 tonnes of light berries of pepper. But, the domestic pepper market in Kerala is able to supply only 500 tonnes of light berries of pepper. For the rest, the oleoresin industry in Kerala depends on the import of pepper from Sri Lanka and Vietnam. Import of black pepper to Kerala is an important reason for the fall in its domestic prices. According to George Paul, Director Synthetic Industrial Chemicals Ltd, a leading oleoresins export firm at Kolencherry, Kerala, a total ban on the import of pepper would mean that the oleoresin industry may have to shift the operations to Vietnam or Sri Lanka from where it is importing light berries of pepper for oleoresin extraction. According to Kishore Shamji, former president of India Pepper and Spices Trade Association (IPSTA), the main problem in the domestic market of pepper in Kerala is sale of imported pepper in the domestic market. x) Declining Export of Pepper from Kerala Pepper export from Kerala had a golden era during 1990 s and Kerala enjoyed a dominant position in the supply of black pepper to the world markets. Pepper export from Kerala touched a record 40282 metric tones during 1999 and the share of Kerala in the total pepper exports from the country during the year was 94 per cent (Refer Table 3.10). However, pepper exports from Kerala started to decline with supply of pepper to the world markets by the new pepper producing countries like Vietnam and Brazil.

99 During 2006 the export of pepper from Kerala was only 12008 metric tones, which was only 69 per cent of total pepper exports from the country. Even the import of pepper from India by USA, the major importer of Indian pepper looks shaky as their imports from India declined from 23830 metric tones during 1997-98 to 10386 metric tones during 2006-07, probably due to the availability of cheap pepper from Vietnam or Indonesia in the global market. Increased production of pepper in Kerala combined with increasing imports and declining exports result in an oversupply position of pepper in the domestic market in Kerala which furthur prevents any rise in the domestic prices of pepper in Kerala. The other problems affecting the black pepper cultivation in Kerala are non availability of healthy disease resistant black pepper varieties, inadequate efforts on value addition and post harvest technology and lack of involvement of pepper cultivators in this area, inadequate assistance from the developmental agencies like Spices Board and Krishibhavans and lack of finance and indebtedness of pepper growers. Even though pepper, the king of spices has been in distress in Kerala with the birth of the 21 st century, it has not lost its royal role in the kitchen. Though reduced in valuation, the king has not lost the crown, as it still remains the most widely used spice in the world. Pepper still reigns supreme in the cuisines of the world and occupies a pride of place in the vegetarian and nonvegetarian cuisines of both the west and the east. Pepper is often used three times in the same dish before the food is eaten; first in the kitchen as an ingredient in the dish, secondly to correct or improve the overall seasoning during cooking, and thirdly at the dining table for the diners to add more spice and flavour to the prepared dishes. Thus, pepper cultivation of Kerala has a number of prospects. The prospects before pepper cultivation in Kerala include:

100 i) Hot Trend in Spice Consumption Spice consumption in the developed world and parts of the developing world is increasing with the hot-spice segment growing more rapidly than other segments. The American Spices Trade Association (ASTA) calls this trend as the hot trend in spices. An analysis of the United States market, the largest importer of spices shows that spice consumption per capita is growing. Between the periods 1994-98 and 2004-05 consumption of the spices showed the following growth figures: All hot spices + 73% Red pepper + 169% Black, white pepper + 60% Ginger +68% Mustard seed +48% According to American Spices Trade Association (ASTA), Americans are using 50 per cent more pepper today, than they were a decade ago. A 1990-95 study indicated that the Danes are the pepper eaters in the world in terms of per capita consumption (194 g/year), followed by Germany (190 g), Belgium (181g), USA (168g), Netherlands (151g), Austria (150g), France (138g), Sweden (122g), Canada (112g), and Switzerland (112g). However, in terms of the use pattern, US cuisines occupy the first place (Spice India, June 2006). The hot trend in pepper consumption, the prevailing trend for convenient foods and that too highly flavoured and increased global travel signal enormous potential for increased use of pepper all over the world. ii) Value Addition to Pepper and Other Spices Products The term value added products indicates that for the same volume of a primary product, a higher price is realized by means of processing, packaging and upgrading the quality or such other methods. In spice industry it refers to the production of spice oils and oleoresins, ground spices, curry powders, consumer packed spices and the use of improved processing technique. Value

101 addition involves not only new products; for example black pepper can be cleaned well, ensure uniform black colour, grade in different sizes as 4.75 mm, 4.25 mm, 4.0 mm etc; pack in different consumer packing and market in domestic and outside markets. During 1960 s and 1980 s, the major spice exports from Kerala were dried pepper, ginger and cardamom in the raw and bulk form, packed in gunny bags. But, now Kerala s earnings from the export of value added spice products is almost equal to the earnings from the export of raw spices. At present there are eight operational spice oils and oleoresin units in Kerala. While India accounts for 75 per cent of the world trade in oils and oleoresins, 90 percent of such business is from Kerala. Kerala supplies a full range oleoresins like pepper powder, pepper oleoresin, dehydrated green pepper, frozen pepper, green pepper sauce, ground black pepper ground white pepper, end products of ginger such as ginger syrup, ginger candies, crystallized ginger, and the various end products of chillies, turmeric, nutmeg and mace and vanilla. As per the statistics of Spices Board, the earnings from the export of spice oils and oleoresins during 2006-07 amounted to Rs.51079 lakhs in value and 6250 MT in quantity. Value added products exports assume great significance particularly in view of the current stagnation or fall in the exportable surplus of several commodities like pepper and cardamom. The spectacular growth in the export of spice oils and oleoresins proves that Kerala has strengths not only in producing but also has high tech capabilities to produce high value spice products of international standards, and this can make excellent commercial propositions, if innovative entrepreneurs enter the field. To increase the prospects of the export of value added products of spices, there is a need to add new products like pepper based recipes and that requires a research oriented mental thinking. There are many other areas apart from food industry such as medicine, cosmetics and perfumery sectors, where value added spices could be

102 used. Such research calls for huge investment, scientific marketing and promotional activities, which should be done jointly by the Union Commerce Ministry, Spices Board and the industry. iii) Good Agricultural Practices (GAP s) The concept of Good Agricultural Practices has evolved in recent years in the context of a rapidly changing and globalizing food economy. According to Food and Agricultural Organization (FAO), GAP is the application of available knowledge to address environmental, economic and social sustainability for on-farm production of safe and healthy food and non-food agricultural products (Spice India, June 2007). Many farmers in developed and developing countries already apply GAP through sustainable agricultural methods such as integrated pest management and conservation agriculture. Several codes of practice in line with GAP have been designed by producers organizations eg. British Retail Consortium (BRC), Fresh Produce Consortium (FPC), Euro-Retail Produce Working Group (EUREP), UK Food Standard Agency and Comite de Liaison and Europe-Afrique-Caraibes-Pacifique (COLEACP). This trend of increasing adoption of GAP by both public and private sectors may create incentives for its adoption by spices producers, by minimizing the risk of contamination, right from pre-planting stage of spice plants to post harvest stage of the crop and by opening new market opportunities. The Good Agricultural Practices is still at a nascent stage in Kerala. There are a few farmers only who are practicing GAP in pepper production in Kerala. The Spices Board has set up a training complex at ICRI Myladumpara, Idukki district, Kerala. The complex is intended for conducting GAP training programmes for unemployed youths on quality pepper production. Training is being imported on GAPs for all major export oriented spices such as vanilla, cardamom (small & large), chilli, pepper, ginger, turmeric, herbal spices, seed spices and tree spices. The objective is to train a large number of resource

103 personnel from the rural communities, who would thereafter provide an interface between the Board and the spice producers of the area by providing necessary agriculture based services to the spices growers for the production of quality spice in their villages. Even though food safety from farm to fork is the responsibility of everyone throughout the food system, adoption of GAP by spices growers, packers and spice handlers, would ensure better quality of spices, food safety and the increased returns to spice produces; and also thereby offer better prospects for the spices trade in Kerala. iv) Organic Farming Organic farming is farming without synthetic pesticides and chemical fertilizers. Characteristics usually associated with organic farming are reduced soil erosion, Lowell fossil fuel consumption, less leaching of nutrient, greater carbon sequestration and little to no pesticide use. All over the world there is a growing demand for organic spices. Countries such as the US, Singapore and Switzerland having consumers with high disposable income are pushing up the demand for organic foods and drinks. Spices Board has taken bold initiatives for conceptualizing organic farming of spices through integrated pest management and integrated disease management systems. The spice farmers in various parts of Kerala are responding effectively and positively to such reforming exercises. In Idukki district in Kerala, the Gandhian study center at Rajakumari and the Kerala Agricultural Development Society (KADS) at Thodupuzha are promoting organic farming of spices. KADS has already launched steps for promoting Mankulam Panchayat in Idukki as an organic farming Panchayat. The same is done by the Wynad Social Service Society (WSSS) at Mananthawady in Wynad. Besides international organic farming certifiers such as IMO, SKAL and ECOCERT with offices in India and some Indian organic certification bodies have also been accredited under the National Project on Organic Production (NPOP) the largest of them being M/s Indian

104 Organic Farmers Producer Company (INDOCERT) at Aluva in Kerala. The Union Ministry of Agriculture has also come up with plans for a national project for organic farming. Organic certification by accredited agencies is required for being considered as an organic product, after which only it will get the status and premium price. In India, the National Project on Organic Production (NPOP) under the Union Ministry of Agriculture is the official agency in charge of organic certification. Now there are 12 accredited certification bodies including INDOCERT, Alwaye and LAKKON QUALITY, Thiruvalla. The leading organic spice producers/ exporters in Kerala are the Peermade Development Society of Peermade, Idukki and the INDOCERT at Aluva. M.S. Swaminathan in his study report on WTO Concerns of Kerala had recommended in 2003, the promotion of organic farming and commencement of an organic farming research and certification center in Kerala. In June 2006, the Kerala Agricultural Development Society (KADS) at Thodupuzha requested the government of Kerala to declare Idukki as an organic farming district. During the primary survey for the study many respondents suggested that just as Sikkim has been declared as an organic farming state, Wynad and Idukki districts in Kerala should be declared as organic farming districts. Poabs Organic Estates at Nelliampathy in Palghat district has emerged as the most outstanding agency in India, popularizing organically produced coffee, tea, pepper, cardamom and other spices. The present roadmap drawn on the promotion of organic farming in Kerala and the positive response to this by the spice producers generates prospects for the pepper and cardamom producers in Kerala. v) Future s Trading A commodity future means an agreement between two parties to buy/ sell commodities for a specific consideration on a particular future date. A

105 commodity futures contract is essentially a financial instrument. Futures trading in commodities have grown in importance world wide especially after the smooth functioning of commodity exchanges like Chicago Board of Trade (CBOT), Newyork Mercantile Exchange (NYMEX), London Metal Exchange (LME) and Tokyo Commodity Exchange (TOCOM). In India the commodity futures contracts are regulated by the Forward Market Commission under the Forward Contracts (Regulation) Act, 1952 and the Rules framed there under. Risk management becomes a must for survival since there is high volatility in the present global spices markets. Futures contracts provide two benefits risk management and price discovery. Hedgers use futures to shift unwanted price risks to others. In Kerala, commodity futures trading are done in three commodities only viz. black pepper, cardamom and rubber. A series of steps taken by the government has helped the generation of positive sentiments among the participants relating to the benefits of futures trading. Spice producers would be the primary beneficiaries of futures trading in spices viz. pepper and cardamom. These benefits include better price discovery, hedging, and international price knowledge, seasonal and off seasonal production forecast. It is also helpful to the spices exporters to escape from unexpected fluctuation of the commodity prices and currency. A study on futures trading in pepper conducted by Elizebath Thomas (2002) revealed that there is high positive correlation between spot and futures prices of black pepper. As price fluctuation and low prices have created problems for the spice cultivators and traders in Kerala and as futures trading in spices is expected to stabilize prices to same extent, giving producers and traders the possibility of predicting price trends and making investment decisions accordingly, future s trading in spices may bring more prospects for spices trade in Kerala. However, the primary survey in this context revealed that only a few spices cultivators do participate in futures trading in pepper and cardamom.

106 vi) Spices Board s Flavourit Spices Board has launched 50 different spices under the brand flavourit in the Indian and US markets. These include spices in straight, liquid, paste and in powder forms, organic spices and flavoured teas. Flavourit is a registered brand, owned and promoted by Spices Board and marketed by STCL (formerly Spices Trading Corporation Ltd, Bangalore). The objective is to make the Indian brands visible in the international markets especially in the high-end department stores and super markets. The brand is processed to meet exacting international food safety standards, be they the requirements of the EU or USFDA (United States Food and Drug Administration), from premium graded spices directly sourced from Indian spice growers. Flavourit also seeks to restore to certain once well-known grades of Indian spices, their lost glory. vii) Mixed Cropping with Black Pepper Many farmers who had tried single (mono) cash crops for years and burnt their fingers on several occasions have, of late taken up mixed cropping that is proving to be a profitable proposition. The benefit of going for mixed crop is that when the price of one commodity drops sharply, another commodity would be fetching good price. Thus, another would make up the loss on one crop. Ever since we have converted our pure pepper plantation into a mixed one with coffee and cardamom along with pepper, we have not faced any financial loss, said Divakaran, a pepper grower in Erattayar, in Idukki district. Thus, the practice of doing mixed cropping with black pepper offers goods prospects for the pepper cultivators. 4.3 Problems and Prospects of Cardamom Cultivation in Kerala 4.3.1 Cardamom Cultivation in Kerala In India, Kerala is the leading cardamom producing state. During 2006-07 the share of Kerala in the total cardamom production in the country was 77 per cent that of Karnataka 15 per cent and the balance 8 per cent was from Tamil Nadu (Spice India, August 2007). During the year 2006-07, the

107 cardamom production in Kerala was 8545 MT of which only 371.47 MT was exported (i.e 4.35%) and the balance 95.65 per cent was consumed within the country. Three fourth of the cardamom produced in India comes from Idukki district in Kerala and it is regarded as the finest quality cardamom in the world. High ranges of Kerala state which mainly lies in Idukki district with deeply dissected valleys and camel hump peaks, which is a notable part of the South Western Ghats, is regarded as the best suited area for cardamom cultivation. The Cardamom Hills Reserve (CHR) of the Western Ghats is a vulnerable repository of biodiversity of spices. It is blessed with wet evergreen forests covering an area of 86000 hectares earmarked for cardamom cultivation. The CHR lies in between the Thekkady Tiger Reserve on the one side and the Eravikulam Nature Park on the other side close to Kerala Tamil Nadu borderline. This particular piece of forest reserve is mainly responsible for preservation and conservation of the climatic and ecological conditions of a wide area consisting of Idukki, Ernakulam and Kottayam districts in Kerala and Theni district in Tamil Nadu. Now there is a total extent of 41000 hectares of cardamom plantations in Kerala. Of this 32000 hectares are situated in Udumpanchola, Peermade and Devikulam Taluk in Idukki district and the rest 9000 hectares are in Wynad district and Nelliampathy in Palghat district. The precarious situation is that once cardamom plantations become unsustainable due to being non-remunerative or other reasons, the whole CHR would be deforested and converted to cultivations not dependent on forest. That will strike an irreparable heavy blow to the environment of both Kerala and Tamilnadu states. Further, a vast population including 25000 farmers, 50,000 labourers and a few thousand other employees and traders are depending on cardamom plantation industry for their livelyhood. The peculiarity with