The Case of Indian Cardamom
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Occasional Paper - 30 W^ T^ 3tkf^T^ xHH^^iJdl cTSIT COMMODITY PRICES AND THEIR EFFECT ON INVESTMENT VIABILITY AND REPAYMENT: THE CASE OF INDIAN CARDAMOM \j ^1. \i^. HKIilUH DR. S. NARAYANAN 'Wij] K)r^ < Department of Economic Analysis and Research National Bank for Agriculture and Rural Development Munnbai 2004 Occasional Paper - 30 W^ ^gj^ 3ik ft^ ^^RSjcTT cTSTT COMMODITY PRICES AND THEIR EFFECT ON INVESTMENT VIABILITY AND REPAYMENT: THE CASE OF INDIAN CARDAMOM DR. S. NARAYANAN NTX Departnnent of Econonnic Analysis and Research ^^T^^ 3^7 ^J|cH>| feDRT fe National Bani< for Agriculture and Rural Development Mumboi 2004 STTofflfqfccTcr FTM, tTt. STT. -clollMK^I o Author Dr. S. Narayanan Alampillil House E O. Vattaparamba (via) Kurumasseri Ernakulam District - 683579 Kerala The usual disclaimer about the responsibility oj the National Bank as to the facts cited and views expressed in the paper is implied. i^rfe ^ ^-24, '^' eeit^, tft. -sff. ^. 8121, s[p^-^ W^eT^m, W^ (^), ^ - 400 051 ^RT ychif^M. T?etf5t ^THI^^M, eft3R M^ (^.), gw| - 400 013 ^RT ^gfe^ I Published by National Bank for Agriculture and Rural Development, Department of Economic Analysis and Research, 4* Floor, C Wing, Plot No,C-24, G Block, PB No. 8121, Bandra-Kurla Complex, Bandra (E), Mumbai-400 051 and Printed at Alco Corporation, Lower Parel (W), Mumbai. ii yT^pgjZR 97^: cjofw 5FM ^ ^cblfd'Ull ^ g^q" cTT ^ ^5f^ oi(^l<il' #5 aW 3T2MT 3TcTr^=ra5Rt g§twf f^wt ^ gr^f^cR jfToHieiH art^ ?T?^TT #5#ni 4' 3^ra5r Sfc^cT arr^ f. # ^?ft aff^, f^?m5, ^WTf^TRT ^f, ^^ "felR-fg^ 3ftT TTFc^^jyt dMcbKl #5 fcTC 3^cTSer ^5^ 4 ^I^^H^H ¥tf, ^^ #5 ^^ra^ ^ aft ^?T?^TT fen 3^ fcTO ^' 3^7^ 3Tc4cT 3TT^ f. f^W^R, # ^^^ITR, >HEimch>1^?ra5 3TtT ^ aft^ ^52Zt, jfSfmcT ^ SPJr^T >WI$^H>H ^^, ?1^^ #5 ^ Z\.c^.^.^=WH, ^^\l\dpf^WY3rS Sft^ ^ ^^^ ^5TTR, q^tcS U^. HKIiJUH 111 PREFACE Often, low rate of repayments of agricultural credit has been pointed out as an effect of low or unremunerative prices of farm products. The problem is essentially related to the profitability of cultivation in which the product prices play a significant role, which is directly related to the investment viability. The prices of Indian cardamom have increased substantially during the past decade along with its productivity. Has the profitability of cultivation increased during that period? What are the changes that have taken place in production technology, investments and marketing during this time? How have the repayments of loans advanced for cardamom cultivation by the financial institutions performed? These are the issues dealt with in this paper. I am extremely grateful to Shri K V Raghavulu, Chief General Manager at the Head Office of NABARD, Mumbai, for his constant encouragement and support extended to me in the preparation of this paper. Shri Koshy John, Director, Spices Board, Kochi always made himself available for discussions and helped to gather valuable information. Shri D Varghese, Assistant General Manager, NABARD, Idukki (Kerala) provided useful information and helped to get data from the financial institutions in the district. He also extended assistance for the collection of data from the cultivators in the study area. I am indebted to many, at the Spices Board, Kochi for the help they rendered in connection with the preparation of this paper. Particularly, Shri Sreekumar, Assistant Director and Shri Jose Kutty, Librarian gave valuable support. Shri T K K Nair, Assistant Director, Spices Board at Idukki and Shri Suresh Kumar, Field Officer at the same office were always ready to be helpful. The assistance provided by Shri Noby Jose, Idukki in the collection of the data on cost of production is also gratefully acknowledged. However, needless to say, the shortcomings of the paper are entirely my own. S. Narayanan IV TABLE OF CONTENTS Page No. yictct>yH iii PREFACE iv (*l4Mlrich)^fIR vii EXECUTIVE SUMMARY ix I INTRODUCTION 1 1.1 The Relevance of the Paper 2 1.2 Overview of Literature 5 1.3 Objectives 6 1.4 Methodology 6 1.5 Organisation of the Paper 7 II PRICES AND INVESTMENTS 2.1 Salient Features of Cardamom Cultivation 9 2.2 Price, Area and Production 11 2.2.1 Area 14 2.2.2 Production 17 2.3 Price and Technological Changes 18 2.3.1 Research and Development 19 2.3.2 Production Technology 19 2.3.3 Harvesting 22 2.3.4 Processing 23 2.4 Price and Markets 25 2.4.1 World Markets 28 2.4.2 Domestic Market 31 III COSTS, RETURNS AND LOAN REPAYMENTS 33 3.1 Costs and Returns 33 3.2 Loans and Repa3mients 36 3.2.1 Agricultural Credit in Idukki 38 3.2.2 The Informal Credit System 42 3.2.3 Overdues and Price of Cardamom 43 REFERENCES 47 ANNEXURES 51 cl5l4Mlc1ch>FrR (i) ^^RcT 4 ^rnWf ^ TJc^ ^ 1970-71 ^ 2001-02 % c(tTR 6.41 gfcf^TcT ^^t ^rf^gj^ra^ff^crT^^^. 3ri^^^qclT^JrTcTTtf^^!7F^^ 1970-71 ^ 1988- 89 % cft^O^ 351? 3T£rf?r W\'m 5.7 gfcT^TcT ?fcT^ dt. -g^ 1989-90 ^ 2001-2002 cT35g§t3?^i^^TFc[T7.iogfcRT?rpfcT3^ eft. ^ smflj #5 ^TR #5^rr 4 ^c^ ^35t^s[f?Ta5crfT(7.i3gfci¥T?r) sff. (ii) fg^T^ W^fcTT^35[^fT^^5T3cqT^35, 3q^3Tn3ftTf%^cra5^^#. ^t^ f^n5c^ ^ ^^ra^f ^ ^TR ^^ra5r f^ rT ^3fr ^ 35q |3n t aftT ^3tc^ #5^cT ^TRcff^ $dmrjl (TjT^t) cf5T 74 ^rfcT^lcT JcMlciH 3??cn# SftT^^raJT JcMlciH 37^ ^333tfaT^4^a3^#5^$dl-Mtri J(^lciH35T93;rfc^?TcT#. (iii) ?^?R5cT^#?ff 3Tt35t ft!^cixH41^^?t^ ^35RUT, ^dl-!>lrjl #5StcPfcT 3TT^ ^Tc^ ^^tR$dli|Tj| ^g3tTrcTffe35T3^^g^TT^TFT?^ra3t3ffrT3rRT35f5^2TT. ^i^ ^ t^JIT TT^f35 ?^333t i^ 4 ^dl-Mrll 35T ^5r 35Tq§t FcT cra5 o^ ^^T c^ ^^. (iv) ^W^ f3Tc^ 4 S^TT ^ff STWftr ^ cft^R ^dWtJl JcMlciH ^ ^i^ cfT cRT^TrT 5.32yldyid W5ffe^;ffcra^^. ^?TcTR3ftT3R#^ 5^135(1970-71 ^ 1988-89) ^^c[TfM5 0.15;rfcT?IcT sft 3TtT^ #5 G[?ra5 (1989-90 Tt 2001-2002 rra5) ^ 9.69 gfcmcT Sff. ^3^ foT^ 4 1989-90 ^ 2001-02 cT35 6<M\i^ Wt ^ ^ 3tftf35crfT9ft. anfFTt,15^c^^%35RUT3cMlciH 4 HeiccH^uf ffe ^ dt. ^OF ^ m^ TRTT f35 ^oTKrat 33t 3cmG[35cTT 4 ffe % 35FM, JcMlciH 4 ^% ^f. (V) ^%cr?T35 4$dmTJl 3cMlciH33tg1?TrfTT^^qf^3cf^3TmT. ^5^35^51^ ^^?3^$dmTri #54d^lZ35^^fWr^ftcbrfld^faT^3Tftj353^3T5n^Ft ^?T35cft2ff. ^f35^35r ddllcH #5fcTO31MHmi ^ T^TT. S^T^lt f35^THt ^ ^cft 33t gsnaff 35T U35 ^#53T 9lt ^^TR f35CrT. f^rTT^ '^ ff^, jt3 ^^5 35? 3Tf?735 W^ 4 (vi) ^ #5 2[?T35 4, ^dWrfl #5 ;n2TfT135 !g^W3<U| ^fcTC-foxHUl 5KT tFcR g1?7rfTT^^3R^TTf. 5T^^?35^UT^gTU?K^35^^frn?f%t^^f35^TT^. Vll (vii) ^3T^^G[tTR^cTmtff #5fwJM4 qfwf^3TTT7. ^cfFTT ytTTTcft ^ ^3ft ^ fTRT 3ftT Eftc^TffTT -^ mf ^ ^f. (viii) ^ 1980-81 ^2001-02 cra5c^3mftr^c[kR^dl'4Tjl Jc<JlciH^^?7TxH[dd<U| ^ 14.23pfcI?[n^^Tf^g5^cf^5^^^^^f 3ftTTnTTg5t^cHT4 3TfcTt^#^ ^^35fT?T: 10.24 5rfcT?TcT3;ftT1.39?fc[?Tcr2ft. ^^f^^^cT, ^#55:?ra54 5fiOT TrfeRi^4l5.51 RfcmcT^ff^3TtT3TfcT^^4 15.32 IffcRTcTg§t frRJ^^ ^ TT^. ?FrT^^^TRff43Tfera5^%c[tTH^?tfgcTf^?ft^ 3TtT ^i^ ^ ^^cff ^ 1^ ^ srferaj ^ ^ ^ TT^. (ix) ^ 2002-03 ^ ^TTcff qTI?c[5f*)d1jJ W ^^ ^dlijrll ^ 3c<]|cH cTFTcT cW^TTT 250^?iq^dt. ^rrnff^TT?f3TtTl^i^Hf^T5^crt^Ft^^G[?r^#5^g^^ ^Gft^O^^^srflra?^. ^STcTtcTFTcntf^^dlildl^^^^^TTcff.Jcqicicbdl Vlll EXECUTIVE SUMMARY (i) The price of cardamom increased at an annual compound rate of 6.41 per cent from 1970-71 to 2001-02 in India. An examination of the data revealed that the growth was less during the period of 1970-71 to 1988-89 - only about 5.7 per cent per annum. The subsequent period from 1989-90 to 2001-02 had a rate of 7.10 per cent per annum. The rate of increase in the price was highest in Kerala during this period (7.13 per cent). (ii) India was the largest producer, consumer and exporter of carda mom in the world. But its exports have declined sharply during the past two decades and the domestic consumption is rising. Kerala pro duces 74 per cent of Indian cardamom (small) of which 93 per cent is contributed by Idukki district. (iii) The effect of increases in price on the area under cardamom was difficult to examine as the area statistics were not reliable. But, it was seen that the area under cardamom was more or less stable in Idukki. (iv) The growth rate of cardamom production during the entire period came to about 5.32 per cent compound rate per annum in Idukki dis trict. The growth rate was only 0.15 per cent in the seventies and eight ies (1970-71 to 1988-89) and 9.69 per cent during the nineties (1989-90 to 2001-02). The growth rate of production was the highest in Idukki in the latter period. Clearly, the response of production to price increases was significant. It was also found that it was the increase in productivity of cardamom, which led to the growth in production. (v) The technology of cardamom production changed during the nine ties. A high yielding plant variety was evolved and introduced by the farming community itself. Enterprising farmers perfected a package of cultural practices, too. Increased use of irrigation and application of large quantities of organic manure were also noted.