TIME TO STEP UP CHILLI EXPORTS

By: DR M. THAMARAIKANNAN dr g. palaniappan C. SENGOTTUVEL TIME TO STEP UP CHILLI EXPORTS Though Indian chilli exports show satisfactory trends, India is facing tough competition in the international market, as price of Indian chilli powder is considered too high and other countries provide chilli at competitive rates to the major importing countries. though it is produced throughout the world. A large demand for chilli comes from several chilli-consuming countries such as India, China, Mexico, Thailand, US, UK, Germany and Sweden. Indian share in global production is 50 to 60 per cent. However, India is the only source for hot chillies. Origin and history Chilli is considered as one of the commercial spice crops. Named as wonder spice, it is the most widely used universal spice. Different varieties of chilli are cultivated for varied uses like vegetables, pickles, spices and condiments. In daily life chillies are integral and the most important ingredient in many different cuisines around the world as these add pungency, taste, flavour and colour to the dishes. India is the world leader in chilli production followed by China and Pakistan. Indian chilli is considered to be world-famous for two important commercial qualities colour and pungency levels. Some varieties are famous for the red colour because of the pigment. Other quality parameters of chilli include length, width and skin-thickness. The bulk share of chilli production is held by Asian countries, Chilli is believed to be originated in Mexico in 7000 BC. Chillies were grown and cultivated from 3500 BC. It is said to be the first-ever domesticated crop in America. At that time, chillies were cultivated by the farmers together with a primary crop to protect the latter from any damage caused by birds. Chillies gained popularity in the American continent for flavouring and have been largely cultivated since then. Christopher Columbus, the founder of America, was one of the first Europeans who encountered and consumed chilli and called it pepper due to its taste resemblance. Crushing the dried pods gave chilli powder, which was later identified as a substitute of peppercorn. Chilli crop came to the Asian continent during the sixteenth century with the identification of new sea routes by the Portuguese and the Spanish explorers. In 1498, chilli 30 FACTS FOR YOU September 2011

was brought to India by the Portuguese explorer Vasco-da-Gama. Soon chilli became an important ingredient in Indian cuisine. It became popular in entire Asia rapidly, and native Asians started cultivating this crop as well. Chilli cultivation in India A large percentage of chilli production has shifted to Asia, as the South-Asian climate suits this vegetable crop. Today, the most sharp and valued varieties of chilli are grown in Asia only. Chilli is cultivated in tropical and sub-tropical climates, mostly as a rain-fed crop in India. The most ideal climatic conditions are rainfall requirement of about 850-1200 millimetre per annum and temperature range of about 20-25 C. Moreover, light, loamy and fertile soil with organic matter is preferred for satisfactory growth of the crop. Also, the crop needs well-drained soil with adequate moisture for growth. Chilli is a seasonal and annuallygrown cash crop. Its sowing starts after commencement of the southwest monsoon, i.e., from the first week of August and extending until October. Total crop duration is around four to five months, depending upon varieties cultivated, climate and the soiltype. Harvesting is done through picking. Ten to twelve pickings are harvested within the season from December onwards. Arrivals start in February and continue till April after a proper drying under sunlight. Potential health benefits of chilli consumption Table I Major Chilli Producing Countries During 2008-09 Countries Production Production (MT) (Int $1000) India 1,269,850 3,771,670 China 252,000 748,482 Peru 165,000 490,078 Thailand 161,505 479,697 Pakistan 130,000 386,122 Bangladesh 117,765 349,782 Ethiopia 115,000 341,569 Ghana 81,000 240,583 Vietnam 78,500 233,158 Myanmar 71,000 210,882 Mexico 60,000 178,210 Nigeria 50,000 148,508 Egypt 45,600 135,439 Democratic Republic of the Congo 34,000 100,985 Romania 33,000 98,015 Bosnia and Herzegovina 30,000 89,105 Côte d Ivoire 20,000 59,403 Turkey 20,000 59,403 Nepal 16,362 48,597 Benin 15,000 44,552 Source: FAO STAT, US Chilli is an important cash crop of India and is grown for its fruits, which are used both green and ripe (the latter in the dried form) to impart pungency to the food. Green chillies are rich in vitamins A and C, minerals and proteins. Dry chillies are also rich in vitamins A and D. Chillies are excellent source of vitamins A, B, C and E with minerals like molybdenum, manganese, foliate, potassium, thiamine and copper. Chilli contains seven times more vitamin C than orange. Ever since their introduction in India, chillies have been included in ayurvedic medicines and used as tonic to ward-off many diseases. Chilli is good for slimming down as it burns the calories easily. It stimulates the appetite, helps to clear the lungs and stimulates the digestive system. It is also used in beverages. Chilli belongs to the genus capsicum, under the solanaceae family. The extracted capsaicin is used in pain balms, cosmetics and pharmaceutical industry. Capsanthin a pigment derived from chilli is used for natural colouration in jam and jelly preparations. Extracts of chilli are used in the preparation of ginger beer and other beverages as well. Important cultivable chilli varieties There are more than 400 varieties of chilli available worldwide. These differ in pungency, size, shape and colour. Some of the main types of chilli are aji, anaheim, bell pepper, bolita, cascabel, cayenne, habanero, paprika, jamican hot, pasilla and serrano. Places like Andhra Pradesh, Tamil Nadu, Gujarat and Kashmir became famous for different varieties of chilli, viz, naga jolokia, byadgi, ellachipur sanman chilli, guntur sanman chilli, kanthari mirch, kashmiri mirch, mundu chilli or gundu molzuka and tomato chilli. World scenario The world area and production of chilli is around 1.5 million hectares and 7 million tonnes, respectively. Major chilli growing countries are India, China, Pakistan, Indonesia, Korea, Turkey and Sri Lanka in Asia; Nigeria, Ghana, Tunisia and Egypt in Africa; Mexico and the US in North and Central America; Yugoslavia, Spain, Romania, Bulgaria, Italy and Hungary in Europe; and Argentina, Peru and Brazil in South America. The world trade in chilli accounts for 16 per cent of the total spice trade in the world, occupying September 2011 FACTS FOR YOU 31

Table II Area, Production and Yield of Chilli in India During 1999-2000 to 2008-09 Year Area Production Productivity ( 000 HA) ( 000 MT) (kg/ha) 1990-91 816.20 719.00 880.91 1991-92 846.30 617.50 729.65 1992-93 962.10 862.10 896.06 1993-94 930.00 800.10 860.32 1994-95 829.20 794.70 958.39 1995-96 883.70 809.70 916.26 1996-97 944.20 1066.00 1129.00 1997-98 840.60 870.10 1035.09 1998-99 891.20 1043.20 1170.56 1999-00 959.20 1052.80 1097.58 2000-01 836.50 983.70 1175.97 2001-02 880.00 1069.00 1214.77 2002-03 828.60 896.90 1082.43 2003-04 774.30 1235.70 1595.89 2004-05 737.50 1185.50 1607.46 2005-06 654.00 1014.60 1551.38 2006-07 758.00 1234.10 1628.10 2007-08 805.80 1297.90 1610.70 2008-09 (P) 811.90 1308.62 1611.80 Average 841.54 992.70 1197.49 Source: Ministry of Agriculture, India second position after black pepper. The major chilli importing countries are UAE, European Union, Sri Lanka, Malaysia, Japan and Korea. The major chilli producing countries during the year 2008-09 are shown in Table I. India stood first with a production of 1269.850 thousand metric tonnes, with China as the competitor followed by Peru, Thailand and Pakistan. Chilli production in India Chilli is the universal spice of India. India accounts for 1.2 million tonnes of production annually, and is the largest producer in terms of international trade, exporting 20 per cent of its total production. Since the last decade, chilli production in India is moving northwards due to increasing demand from diversified sectors and changing consumption patterns. The area, production and productivity of chilli in India from 1990-91 to 2008-09 are presented in Table II. It shows that the average chilli production during the above period was 992.70 thousand metric tonnes from 841.54 thousand hectares of area under chilli cultivation with the productivity of 1197.49 kilogram per hectare. From 2002-03 onwards, the area of chilli cultivation decreased but productivity increased because of enhancing farm activities of chilli cultivation. In 2006-07 and 2007-08, chilli production and cultivable area as well as the productivity increased near the average level. In 2008-09, chilli production was 1308.62 thousand metric tonnes with 811.90 hectares under cultivation. Major chilli producing states in India India is a major producer, exporter and consumer of chilli. The major states growing chilli in the country are Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal. The productivity is high in the states of Andhra Pradesh and Tamil Nadu, where chilli is grown under irrigation than in Maharashtra and Karnataka, where the crop is raised mainly under rain-fed situations. The major chilli growing districts of the country are Dharwad in Karnataka, Nagpur in Maharashtra and Prakasam, Khammam, Guntur and Warangal in Andhra Pradesh. Andhra Pradesh stands first both in area and production. Guntur is the largest chilli market in the world. The state-wise area, production and productivity of chilli in India from 2006-07 to 2008-09 are presented in Table III. The table shows that Andhra Pradesh, Karnataka, Punjab, Uttar Pradesh, Tamil Nadu, West Bengal, Madhya Pradesh and Orissa are the major chilli producing states in the country and contribute more than 40 per cent of chilli production in India. The average chilli production in Andhra Pradesh was 772.67 thousand metric tonnes from 221.67 thousand hectares of area under cultivation with the productivity of 3.49 metric tonnes per hectares. The importance of chilli trade in India Chilli is the largest spice item exported from India in terms of volume and occupies second position in terms of value. During 2008-09, chilli accounted for 40 per cent in volume and 20 per cent in value terms, of the total exports of spices from India. The mandatory qualitytesting of chilli and chilli products has made Indian chilli more acceptable in the international market and helped to achieve this higher level of exports. The market for chillies is affected by seasonal price fluctuations, overall production in the country, world demand, stocks available in cold storages and hedging among the various varieties of chilli. Chillies are exported as chilli powder, dried chillies, pickled chillies and chilli oleoresins. The major importers of Indian chillies are Malaysia, Sri Lanka, Indonesia, the US, Bangladesh, Singapore, UK, Nepal and Mexico. 32 FACTS FOR YOU September 2011

Table III State-Wise Area, Production and Productivity of Chilli in India During 2006-07 to 2008-09 (Area in 000 hectares, production in 000 metric tonnes, productivity in MT/HA) States 2006-07 2007-08 2008-09 Average Area Production Productivity Area Production Productivity Area Production Productivity Area Production Productivity Andra pradesh 214 766 3.58 223 772 3.46 228.00 780.00 3.42 221.67 772.67 3.49 (30.61) (64.34) (31.53) (30.69) (62.94) (30.15) (30.75) (62.20) (29.95) (30.68) (63.14) (30.54) Karnataka 132.2 148 1.12 136 155 1.14 141.00 164.00 1.16 136.40 155.67 1.14 (18.91) (12.43) (9.86) (18.72) (12.64) (9.93) (19.02) (13.08) (10.18) (18.88) (12.72) (9.99) Maharastra 98 47 0.48 100 44 0.44 103.00 47.00 0.46 100.33 46.00 0.46 (14.02) (3.95) (4.23) (13.76) (3.59) (3.83) (13.89) (3.75) (3.99) (13.89) (3.76) (4.02) Punjab 2.6 4.2 1.62 2.6 4.2 1.62 2.90 4.40 1.52 2.70 4.27 1.58 (0.37) (0.35) (14.23) (0.36) (0.34) (14.07) (0.39) (0.35) (13.28) (0.37) (0.35) (13.86) Uttar Pradesh 15.1 14.3 0.95 16 15 0.94 18.00 15.50 0.86 16.37 14.93 0.92 (2.16) (1.20) (8.34) (2.20) (1.22) (8.16) (2.43) (1.24) (7.54) (2.27) (1.22) (8.01) Tamil Nadu 61.4 42.7 0.70 67.4 34.1 0.51 66.30 45.20 0.68 65.03 40.67 0.63 (8.78) (3.59) (6.13) (9.28) (2.78) (4.41) (8.94) (3.60) (5.97) (9.00) (3.32) (5.50) West Bengal 52.2 63.6 1.22 62.4 93.7 1.50 58.50 90.80 1.55 57.70 82.70 1.42 (7.47) (5.34) (10.73) (8.59) (7.64) (13.08) (7.89) (7.24) (13.59) (7.99) (6.76) (12.47) Madhya Pradesh 47.63 40.81 0.86 43.01 44.75 1.04 48.10 46.70 0.97 46.25 44.09 0.96 (6.81) (3.43) (7.55) (5.92) (3.65) (9.06) (6.49) (3.72) (8.50) (6.40) (3.60) (8.37) Orissa 76.1 63.9 0.84 76.1 63.9 0.84 75.70 60.50 0.80 75.97 62.77 0.83 (10.88) (5.37) (7.40) (10.47) (5.21) (7.31) (10.21) (4.82) (7.00) (10.52) (5.13) (7.24) Total 699.23 1190.51 11.35 726.51 1226.65 11.48 741.50 1254.10 11.42 722.41 1223.75 11.42 Source: Ministry of Agriculture, government of India Export of spices and spice products from India crossed 500,000 metric tonnes for the first time in the history of spice trade in 2009-10. Despite the economic slowdown in major consuming markets, the export of spices has recorded an alltime-high both in volume and value in 2009-10. Table IV shows the chilli exports from India from 2006-07 to 2008-09. Chilli export from India mainly depended on Malaysia and Sri Lanka. The average quantity of chilli exported was 161,246 thousand tonnes with value of Rs 11689.2 million. The US and UK are other significant importers of Indian chilli. Problems Aflatoxin and pesticide residues are the two major constraints in increasing our exports. Buyers expect a high degree of hygiene and sanitation in processing and preparation of chillies for export. The potential for increasing exports of whole chillies, chilli powder and crushed chillies in consumer packs is very high, provided we meet the stringent quality requirements of importing countries. The consumers in importing countries insist on clean spices and to meet this challenge we have to make every effort to prevent contamination from external sources during harvesting, post-harvest handling, processing and storage. This can be achieved only through an integrated approach with the collective efforts of farmers, processors and traders. Market structure Guntur is Asia s largest market for chillies. The marketing season begins in the first week of March, peaks during the month of April and closes by the middle of May. Around 35-40 per cent of the crop that arrives is stored in the cold storages September 2011 FACTS FOR YOU 33

Table IV Export of Chillies From India (Quantity in 000 tonnes, value Rs million) Country 2006-07 2007-08 2008-09 Average Quantity Value Quantity Value Quantity Value Quantity Value Malaysia 43,625.40 2513.32 51,782.40 3052.07 40,615.40 2607.21 45,341.07 2724.20 Sri Lanka 21,822.40 1122.86 29,504.80 1350.11 37,791.70 1962.80 29,706.30 1478.59 USA 13,058.20 832.82 19,712.60 1295.69 15,793.10 1288.16 16,187.97 1138.89 Pakistan 254.60 5.50 11,349.80 453.20 22,375.80 1019.20 11,326.73 492.63 UAE 12,622.60 368.54 15,813.20 588.91 18,812.90 700.65 15,749.57 552.70 Thailand 626.90 38.71 2913.90 154.43 9189.90 543.46 4243.57 245.53 Indonesia 6488.50 315.11 9305.30 414.68 10,530.50 514.88 8774.77 414.89 UK 2279.40 152.22 2872.30 201.04 3045.10 264.66 2732.27 205.97 Others 24,340.80 4824.43 27,365.50 6574.59 29,845.60 1908.48 27,183.97 4435.83 Total 125,118.80 10,173.51 170,619.80 14,084.72 188,000.00 10809.50 161,246.20 11,689.24 Source: Spices Development Board, Cochin, India present at Guntur and surrounding areas. Normally, about 8-10 million bags of chilli (each bags carries about 35 to 50 kilogram) are traded during the season in Guntur market alone. The market players estimate that trade worth nearly Rs 5000 million takes place in Guntur during the season. The commodity has well-established spot markets. Guntur, Warangal, Khammam in Andhra Pradesh; and Raichur and Bellary in Karnataka are the major spotmarkets at the production centres. The trade channel involves several members, viz, a village-level trader, commission agent, wholesaler, retailer, agents for exporters and exporters. The commodity changes hands several times, exposing all these members to price risk. There are several grades and varieties of chilli grown across India. However, Sannam- S4 grown primarily in Andhra Pradesh ac- Dried red chillies counts for around 30-35 per cent of the total production. This is also the main variety that is exported. If this single variety is offered for futures trading, it will be possible to offer a relatively homogeneous product for futures trading. Ups and downs in production and trade 1. Prices in the Guntur spotmarket are taken as the benchmark to determine export and domestic prices on a daily basis. These prices are greatly influenced by arrivals and on the extent of demand in the market. 2. The commodity displays high volatility with the prices heavily dependent on season, production in different producing tracts spread across the country, demand from exporters and the stock available at the cold storages. 3. The prices of major chilly varieties sold in the country are correlated with each other. As a result, the players in other varieties can hedge their risks through a single high-return variety. 4. The significant decline in production during 2007-08 was mainly due to unfavourable weather conditions in major producing countries like India, China and Pakistan. 5. The cardinal factors driving the increase in production of chilli are the use of high-yielding hybrids and increase in average yield with respect to favourable 34 FACTS FOR YOU September 2011

weather conditions and changing consumption pattern. 6. Due to unattractive prices, most of the farmers shifted their production to other cash crops like cotton and sugarcane, thus resulting in a decline in area and production under chilli cultivation in subsequent years. 7. Crop damage due to floods in major producing regions of south India, particularly in 2005-06, resulted in a sharp decline in production to around one million tonnes. 8. Sowing operation had been in progress since fresh crop arrivals and strong export demand due to lower crop in other major producing countries led to sharp gain in prices during the last few years. 9. A significant increase in area under chilli cultivation may not be seen as most farmers incurred huge losses from the 2007-08 crop, and have not yet recovered from these losses. 10. For the near term, demand from spice industries, retail segment and emergence of export demand may support prices to trade on the higher side. Measures needed Though Indian exports are showing satisfactory trends, India is facing tough competition in the international export market, as the price of Indian chilli powder is considered too high and other competitive countries are providing chilli at competitive rates to the major importing countries. If the country is able to meet the Market Survey strict quality demands of the international market, the exports can be further improved. Necessary steps have to be taken by the government to encourage the exporters to maintain the Indian dominance in the world market. The improved quality and productivity of Indian chillies will enable India to increase exports of chillies and chilli products, effectively meeting the competition from other producing and exporting countries. Dr M. Thamaraikannan is associate professor in the department of commerce at Sri Vasavi College, Dr G. Palaniappan and C. Sengottuvel are assistant professors in the faculty of management studies at VMKV Engineering College, Salem and in the department of commerce, CA at Nandha Arts and Science College, Erode, respectively www.electronicsforu.com www.eb.efyindia.com www.linuxforu.com www.benefitmag.com www.ffymag.com www.efyindia.com September 2011 FACTS FOR YOU 35