TRADE PRACTICES OF PEPPER EXPORTERS

Transcription

1 CHAPTER - VII TRADE PRACTICES OF PEPPER EXPORTERS India, in the past, had almost monopolized the world pepper trade with over 80 per cent market share but at present the share has dropped to less than 50 per cent owing to increased competition from Vietnam, Brazil and Indonesia. The main problem faced by Indian pepper is the high cost of production and low yield as compared to other countries. Another major reason is that in India, pepper plantations have crossed the economic life period of 18 years and the productivity has been declining year after year. Pepper export basket value realized will have a direct impact on the total export earnings from Pepper. Unlike India, other producing countries do not have much domestic consumptions and with a higher productivity and less production cost, they have become more competitive. This has resulted in decreased volume of exports from India. In this context, the trade practices adopted by exporters along with the problems in exporting were examined and the results are shown in this chapter. For this analysis, Chi-square test and Garrett ranking technique were used and interpreted. Challenges in Export Pepper export business is currently under a host of difficulties and challenges. During the earlier periods, exporting pepper was a highly rewarding business particularly due to the monopoly of Indian pepper in the world market. Realising the economic significance of pepper, many other countries started cultivation and trade of pepper. There are countries importing and exporting pepper without even producing the same. Thus, the place of origin is becoming immaterial in the global pepper market. 173

2 Globalisation and the provisions of WTO have changed the structure of international trade itself. Elimination of trade barriers and the provisions of multilateral agreements have visible impacts on Indian spices sector. Such changes have sudden repercussions in the export business and the exporters have to absorb the shocks initially, before affecting the domestic traders or producers. On the other hand, it is the exporter who enjoys any positive movements of the market. Advancements in the communication facilities have resulted in a situation where the pepper importing countries and agencies can analyse the global production and market trends in no time and change their sources accordingly. Even the changes in the exchange rates of currencies of different countries influence the import decisions. Owing to such reasons, purposeful efforts to secure export orders have become inevitable for the exporters to survive in the field. Hence, it is imperative to investigate the impact and implications of different forces on the prospects of pepper export business. Therefore, the primary data from the exporters were collected with the main objective of knowing the problems encountered by them. For this purpose, a sample of 58 exporters (exporting spices products-including pepper) were contacted. The sample gave due weight age to the states whose production together accounting for more than 95 per cent on total pepper production of the country. Moreover, the exporters are normally located closer to the main pepper growing centres. Hence, the three states namely Kerala, Karnataka and Tamilnadu were chosen. The sample also gave emphasis to the size of the firm as large, medium and small exporters based on the export volume traded by them. The maximum numbers of exporters were chosen from Kerala 47 per cent, followed by Tamilnadu 31 per cent and Karnataka 22 per cent. Table 7.1 gives the breakup of the sample from three major states namely Kerala, Tamilnadu and Karnataka. 174

3 Table: 7.1 Distribution of Sample Respondents Category of Exporters States No. of Traders Percentage Small Medium Large Kerala 4 Tamilnadu 3 Karnataka 6 Kerala 17 Tamilnadu 4 Karnataka 4 Kerala 6 Tamilnadu 11 Karnataka From the above sample exporters, information on business practices adopted and problem faced by them was collected. For this purpose, the promoters Chief Executive Officer (CEO) of the firm were contacted. The profile of the respondents is shown in Table 7.2. Profile of the respondents Before going to the analysis and interpretation of data, it is appropriate to have a general view of the profile of the sample respondents, which is presented in Table

4 Table: 7.2. Profile of the respondents Profile Category No. of Traders Percentage Below Age Above Sex Male Female Illiterate Educational status School level College level Professional Below 5 years Period 5-10 years More than 10 years Entrepreneurship First generation Second Generation Sole traders Form of Business Partnership form Joint stock company Business turnover (Per annum) Source of Export order Less than 10 lakh lakh to 20 lakh More than 20 lakh Foreign buyer Foreign agent Others Source: Primary Data 176

5 The above table shows that, Age is an important factor in decision making. It is believed that aged persons are better decision makers in business due to the rich experience gained by them. The study revealed that 12 (20.69%) respondents were in the age group of less than 30 years, 37 (63.79%) respondents belonged to the age group of 30 years to 50 years and 9 (15.52%) respondents belonged to old age more than 50 years. The sample respondents consisted of 51 (87.93%) male and 7 (12.07%) female members. It was also understood that 28 (48.28%) respondents having school level education, (22.41%) respondents belonging to collegiate level of education, 14 (24.14%) respondents belonging to professional level education and finally 3 (5.17%) respondents belonged to illiterate. As majority of the respondents were literate and young, they could have understood the questions well and the information provided by them would be reliable. Export Business Operation The above table also revealed that, per cent respondents were in pepper export for less than 5 years, per cent respondents were in the business between 5-10 years and.86 per cent respondents were exporting pepper for more than 10 years. In the sample 38 (65.52 per cent) respondents belonged to first generation and the remaining 20 (34.48 per cent) belonged to second generation. Out of 58 export units per cent were of sole proprietary unit per cent were of partnership firms and per cent were of joint stock companies. In this study, turnover was analyzed under three categories as low (less than Rs 10 lakh), medium (Rs 10 lakh to Rs 20 lakh) and high volume of turnover (more than Rs 20 lakh). Among the respondents, (22.41 per cent) respondents were classified under low, 19 (32.76 per cent) respondents were under medium and 26 (44.82 per cent) respondents were in the last category i.e high. Out of 58 respondents, per cent 177

6 of respondents directly obtain orders from foreign buyers, per cent respondents were getting orders through foreign agents and only per cent of respondents were receiving orders through IPSTA, IPC, Spices Board, NRI, friends and relatives. For analytical purposes, the important variables of the international pepper markets are identified as demand for the pepper board, supply in the domestic market, price, quality standards, operating expenditure, competition and other external factors. Each of the above variables has been divided into sub-variables and each subvariable has been analysed individually. The scale of operation of the exporters in the field is the base on which such analysis is carried out. The major hypothesis tested in this chapter is as follows: Ho: Pepper exporters do not differ scale wise on export trade practices. hypothesis. The following sub-hypotheses are tested for accepting or rejecting the major Securing export order, getting supply, fetching international price, financial settlement and contract default, international competition, domestic competition, legal formalities, banker s support, Government support, effectiveness of Spices Board and price fluctuation Demand for Pepper Securing export orders is the most important and the most difficult task in the export business. As far as the exporters are concerned, orders from the importing countries constitute the basic of their business. Hence, the export trade begins with securing orders. 178

7 In order to observe the exporters opinion in securing export orders, the responses obtained are grouped in terms of scale of operation in the field and the results are presented in Table 7.3. To test the association among the scale-wise exporters in securing export order the following hypothesis is framed and tested. H 0 : Pepper exporters do not differ scale wise in securing export order Table: 7.3 Securing Export Orders- Scale wise (No. of Traders) Opinion/ Scales Always Sometimes Never Small 6 (46.2) 5 (38.5) 2 (15.4) (22.4) Medium 11 (44.0) 12 (48.0) 2 (8.0) (43.1) Large 15 (75.0) 2 (10.0) 3 (15.0) 20 (34.5) 32 (55.2) 19 (32.8) 7 (12.1) 58 (100) Note: Figures within parentheses indicate percentage to total. Source: Primary Data Chi-Square test result Variables Chi- Square DF Level of Significance Table Significant Hypothesis Demand for Pepper % Not significant Accepted 179

8 It is obvious from the table that, out of 58 respondents, 32 respondents are securing export orders always 19 respondents securing export orders sometimes and only 7 responded never It is revealed from the above table that, as the calculated Chi-square value is less than the corresponding table value of at 5 per cent level, the null hypothesis is accepted and it is inferred that there is no significant difference among the exporters of different Scale of operation, in securing export orders. Availability of Pepper Getting regular supply of pepper as per requirements is very important in the export business. Majority of the international pepper transactions are based on forward contracts and hence, the exporters collect the pepper, months after securing export orders. To test the association among the scale-wise exporters and availability of pepper the following hypothesis is framed and tested. H 0 : Pepper exporters do not differ scale-wise in availability of pepper Table: 7.4 Availability of Pepper- Scale wise (No. of Traders) Intensity/ Scales Small Medium Large Always Sometimes Never 7 (53.8) 6 (24.0) 12 (60.0) (43.1) 4 (30.8) 14 (56.0) 4 (20.0) 22 (37.9) 2 (15.4) 5 (20.0) 4 (20.0) 11 (19.0) (22.4) (43.1) 20 (34.5) 58 (100.0) Note: Figures within parentheses indicate percentage to total. Source: Primary Data 180

9 Chi-Square test result Variables Chi- Square DF Level of Significance Table Significant Hypothesis Availability of Pepper % Not significant Accepted Of the total, 43.1 per cent of the respondents do not face difficulties in procuring pepper, 37.9 per cent face difficulties sometimes and 19.0 per cent of the exporters face the problem in procuring pepper. The calculated value of Chi-square is less than the corresponding table value of at 5 per cent level of significance, the null hypothesis is accepted and it is inferred that there is no remarkable difference among the exporters of different scale of operation in this respect. International Price Another important factor determining the profitability of export business is the international price. It has special significance in pepper export deals, because the price of pepper moves in an unpredictable manner. There are plenty of variables influencing the international price of pepper such as Global demand and supply, speculative practices, exchange rate fluctuations, economic conditions of the importing countries etc causing unexpected ups and downs in the price of pepper. To test the association among the scale-wise exporters in fetching international price, the following hypothesis is framed and tested. H 0 : Pepper exporters do not differ scale wise in fetching international price. 181

10 Table: 7.5 Intensity/ Scales Fetching International Price- Scale wise Always Sometimes Never (No. of Traders) Small 6 (46.2) 4 (30.8) 3 (23.1) (22.4) Medium 10 (40.0) 10 (40.0) 5 (20.0) (43.1) Large 7 (35.0) 8 (40.0) 5 (.0) 20 (34.5) 23 (39.7) 22 (37.9) (22.4) 58 (100.0) Note: Figures within parentheses indicate percentage to total. Source: Primary Data Chi-Square test result Variables Chi- Square DF Level of Significance Table Significant Hypothesis International Price % Not significant Accepted As it could be seen from the table, out of 58 respondents, 23 respondents are getting international price always, 22 respondents are getting international price sometimes and only of them responded never revealing their inability in fetching internal price for their pepper exported. Since the calculated Chi-square value is less than the table value at 5 per cent level of significance, the null hypothesis is accepted and it is inferred that there is no significant difference among the exporters of different scales in getting international price. 182

11 Financial settlement and Contract defaults Timely settlement of the contracts is very important in any business deal. Many of the pepper exporters complaint that the importers make unnecessary delay in settlement. In certain cases they even default the contract. If the prices move in adverse direction theoretically, there are options in almost all forward contracts for cancellation but the difficulties and problem of exporters as a result of such cancellations are high. Though the export deals are based on trade, understanding price fluctuations may tempt the importers to shift their sources cancelling the orders. In fact, there are factoring agencies assisting the exporters in financial settlements. Majority of the exporters do not resort them due to the heavy expenditure involved in getting such services. To test the association among the scale-wise exporters in facing financial settlement the following hypothesis is framed and tested. H 0 : Pepper exporters do not differ scale wise in facing financial settlement and contract default. Table: 7.6 Intensity/ Scales Small Medium Large Facing Financial Settlement and Contract Default Scale wise (No. of Traders) Always Sometimes Never 2 (15.4) 7 (28.0) 8 (40.0) 17 (29.3) 8 (61.5) 14 (56.0) 7 (35.0) 29 (50.0) 3 (23.1) 4 (16.0) 5 (.0) 12 (20.7) (22.4) (43.1) 20 (34.5) 58 (100.0) Note: Figures within parentheses indicate percentage to total. Source: Primary Data 183

12 Chi-Square test result Variables Chi- Square DF Level of Significance Table Significant Hypothesis Financial settlement and Contract defaults % Not significant Accepted This table shows that the problem of financial settlement and contracts default by the importers is faced by 17 respondents always, 29 respondents sometimes and remaining 12 respondents are not facing this problem. It is revealed from the table that, as the Chi-square value is less than the corresponding table value of at 5 per cent level, the null hypothesis is accepted and it is inferred that there is no significant difference among the exporters of different Scale in facing financial settlement and contract default. Price Fluctuation Price fluctuation is an inevitable phenomenon of all products and services. The prices of agricultural commodities are susceptible to fluctuations because agricultural production itself is subjected to a lot of variables. The prices of pepper, without any exception, are always showing wide fluctuations. How far such fluctuations affect the export business have to be understood by the exporters. Hence, the opinion of exporters about its impact was studied and the results are evident from Table 7.7. To test the association among the scale-wise exporters in Price fluctuation is impacting on profitability, the following hypothesis is framed and tested. H 0 : Pepper exporters do not differ scale wise in their opinion that price fluctuation affects profitability. 184

13 Table: 7.7 Intensity/ Scales Price Fluctuation Affects Profitability- Scale wise (No. of Traders) Always Sometimes Never Small 5 (38.5) 4 (30.8) 4 (30.8) (22.4) Medium 5 (20.0) 8 (32.0) 12 (48.0) (43.1) Large (65.0) 2 (10.0) 5 (.0) 20 (34.5) 23 (39.7) 14 (24.1) 21 (36.2) 58 (100.0) Note: Figures within parentheses indicate percentage to total. Source: Primary Data Chi-Square test result Variables Chi-Square DF Level of Significance Table Significant Hypothesis Price Fluctuation % Significant Rejected It is observed from the table that, of the total, 39.7 per cent respondents agree that the impact of price fluctuation on profitability prevails always, while 24.1 per cent responded sometimes and 36.2 per cent responded never. Since the calculated Chi-square value is greater than the table value of at 5 per cent level of significance the null hypothesis is rejected and it is clear that the small-, medium- and large-scale exporters differ significantly in their opinion that price fluctuation affects profitability. 185

14 Export Cost Operating costs involved in the export of Pepper is another important factor influencing the profitability of export business. Export expenditure normally includes freight and carriage, shipping or airlifting charges, packing and forwarding expenditure, commission and brokerage, insurance, incidental expenses etc. Such expenses are met out of the export proceeds, which naturally affect the export profits. To test the association among the scale-wise exporters and export cost, the following hypothesis is framed and tested. H 0 : Pepper exporters do not differ scale wise in incurring export cost. Table: 7.8 Export Cost- Scale wise (No. of Traders) Intensity/ Scales Small Medium Large Low High Very High 6 (46.2) 12 (48.0) 8 (40.0) 26 (44.8) 6 (46.2) 10 (40.0) 8 (40.0) 24 (41.4) 1 (7.7) 3 (12.0) 4 (20.0) 8 (.8) (22.4) (43.1) 20 (34.5) 58 (100.0) Note: Figures within parentheses indicate percentage to total. Source: Primary Data Chi-Square test result Variables Chi-Square DF Level of Significance Table Significant Hypothesis Export Cost % Not significant Accepted 186

15 It is observed from the table that, of the total, 44.8 per cent of the exporters are of the opinion that the cost is low, 41.4 per cent of the responded high and the operating costs of export business are very high for.8 per cent of exporters. Since the Chi-square value of 1.2 is less than the corresponding table value at 5 per cent level, the null hypothesis is accepted and it is inferred that there is no significant difference among the exporters in incurring the of export costs. Competition Competition is one of the most prominent factors determining the prospects of any business. As far pepper is concerned, competition prevails both in the domestic and international markets. The scope and dimensions of international competition is changing fast as a result of globalisation and the provisions of the WTO agreement. Previously, importing pepper to the country was restricted and in certain cases even banned for the protection of domestic producers, but consequent to the WTO agreements, the import restrictions were lifted off and can be freely imported from other origins. As a result, many of the exporters in our country started importing pepper from other origins and re-exports them with or without further processing. To test the association among the scale-wise exporters and their opinion on existence of international competition, the following hypothesis is framed and tested. H 0 : Pepper exporters do not differ scale wise in their opinion on the existence of international competition. 187

16 Table: 7.9 Existence of International competition Scale wise (No. of Traders) Intensity/ Scales Low High Very High Small 7 (53.8) 3 (23.1) 3 (23.1) (22.4) 3.15 Medium 7 (28.0) 9 (36.0) 9 (36.0) (43.1) 2.12 Large 10 (50.0) 5 (.0) 5 (.0) 20 (34.5) (41.4) 17 (29.3) 17 (29.3) 58 (100.0) Note: Figures within parentheses indicate percentage to total. Source: Primary Data Chi-Square test result Variables Chi- Square DF Level of Significance Table Significant Hypothesis Competition % Not significant Accepted As shown from the table, out of 58 respondents, 24 respondents answered that international competition is low, 17 respondents answered that it is high and 17 other answered that the international competition is very high. Based on the Chi- square result, it can be concluded that the exporters of different scale of operation do not differ significantly, because the calculated Chisquare value of is less than the table value at 5 per cent level. 188

17 Domestic Competition Apart from the international competition, exporters have to face severe competition from the domestic market too. Because of the developments in the communication facilities, international pepper traders have easy accessibility over the domestic markets of all the producing countries. This gives them a clear domination over the global market and the domestic exporters are forced to supply produces at the lowest price to the international market. Hence, there is always a tendency from the part of the exporters to push down the domestic prices as low as possible to avoid their losses. Such practices lead to further competition among the exporters. On the other hand, all the domestic exporters have the same problem and they all strive to get the produces at the lowest possible cost with maximum possible quality. The situation leads to cut-throat competition among the domestic pepper exporters as the major reason, forcing them to think about other origins to fulfil the export commitments. To test the association among the scale-wise exporters and the existence of domestic competition the following hypothesis is framed and tested. H 0 : Pepper exporters do not differ scale wise in their opinion on the existence of domestic competition. 189

18 Table: 7.10 Existence of Domestic Competition Scale wise (No. of Traders) Opinion/ Scales Low High Very High Small 5 (38.5) 6 (46.2) 2 (15.4) (22.4) Medium 7 (28.0) 12 (48.0) 6 (24.0) (43.1) Large 10 (50.0) 5 (.0) 5 (.0) 20 (34.5) 22 (37.9) 23 (39.7) (22.4) 58 (100.0) Note: Figures within parentheses indicate percentage to total. Source: Primary Data Chi-Square test result Variables Chi- Square DF Level of Significance Table Significant Hypothesis Domestic Competition % Not significant Accepted The above table shows that, of the total, 22.4 per cent of the exporters have the opinion that the magnitude of domestic competition is very high while 39.7 per cent considered the competition as high. However, 37.9 per cent of them have the opinion that domestic competition is low. As the calculated Chi-square value is less than the table value at 5 per cent level of significance, the null hypothesis is accepted and it is inferred that there is no significant difference among the different scale of exporters in their opinion about the existence of domestic competition. 190

19 Legal Formalities Legal formalities and procedural complexities are highly important in export transactions. Being international transaction, export business should follow legal formalities strictly and comply with the customs regulations, foreign exchange rules etc. To test the association among the scale-wise exporters and existing legal formalities the following hypothesis is framed and tested. H 0 : Pepper exporters do not differ scale wise in their opinion on intensity of legal formalities. Table: 7.11 Existing Legal Formalities Scale wise (No. of Traders) Intensity/ Scales Minimum Tolerable Troublesome Small 9 (69.2) 3 (23.1) 1 (7.7) (22.4) Medium (52.0) 10 (40.0) 2 (8.0) (43.1) Large (65.0) 3 (15.0) 4 (20.0) 20 (34.5) 35 (60.3) 16 (27.6) 7 (12.1) 58 (100.0) Note: Figures within parentheses indicate percentage to total. Source: Primary Data Chi-Square test result Variables Chi- Square DF Level of Significance Table Significant Hypothesis Legal Formalities % Not significant Accepted 191

20 As evidenced from the table, out of 58 respondents 35 respondents are answered legal formalities minimum, 16 of them responded legal formalities tolerable and only 7 respondents are answered troublesome. The Chi-square value of is less than the table value at 5 per cent level of significance and it is presumed that there is no remarkable difference among pepper exporters of different scale of operation in the matter of legal formalities and procedures. Therefore, the null hypothesis is accepted. Banker s Support to Exporters Banking service has become an inevitable element in modern business. Quite often, own funds become insufficient for meeting the additional financial requirements of business. Export business requires huge capital investment and hence, adequate and timely financial assistance of banks is very important. The attitude of banks and other financial institutions towards the exporters is particularly important, both for the survival of the exporters and prospects of the sector. To test the association among the scale-wise exporters and banker s support to exporters the following hypothesis is framed and tested. H 0 : Pepper exporters do not differ scale wise in getting banker s support 192

21 Table: 7.12 Banker s Support to Exporters- Scale wise (No. of Traders) Intensity/ Scales Favourable Neutral Unfavourable Small 3 (23.08) 6 (46.15) 4 (30.77) (22.41) Medium 7 (28.00) 11 (44.00) 7 (28.00) (43.10) Large 3 (15.00) 8 (40.00) 9 (45.00) 20 (34.48) (22.41) (43.10) 20 (34.48) 58 (100.00) Note: Figures within parentheses indicate percentage to total. Source: Primary Data Chi-Square test result Variables Chi- Square DF Level of Significance Table Significant Hypothesis Government policies and attitude % Not significant Accepted The above table showed that, altogether, per cent of the respondents have the opinion that the banker s support towards the pepper exporters is unfavourable while per cent observe a neutral stand towards them. Only per cent receive friendly and favourable attitude from the banking sector. The Chi-square value is less than the corresponding table value at 5% per cent level of significance, which indicates that the exporters do not differ scalewise in this respect. Therefore, the null hypothesis is accepted. 193

22 Government policies and attitude Government patronage is very important in deciding the future and better prospects of any sector. The Government provides various incentives to exporters with the purpose of promoting export volume and to increase the foreign exchange reserves. There are different schemes and incentives provided by the government to the pepper exporters. At the same time, every pepper exporter is bound to pay two per cent of the export turnover as Export Cess which is exclusively used for the functioning of the Spices Board. To test the association among the scale-wise exporters about government s support the following hypothesis is framed and tested. H 0 : Pepper exporters do not differ scale wise in getting government s support. Table: 7. Government s Support- Scale wise (No. of Traders) Intensity/ Scales Favourable Neutral Unfavourable Small 9 (69.2) 2 (15.4) 2 (15.4) (22.4) Medium (52.0) 10 (40.0) 2 (8.0) (43.1) Large 14 (70.0) 3 (15.0) 3 (15.0) 20 (34.5) 36 (62.1) 15 (.9) 7 (12.1) 58 (100.0) Note: Figures within parentheses indicate percentage to total. Source: Primary Data 194

23 Chi-Square test result Variables Chi- Square DF Level of Significance Table Significant Hypothesis Government policies and attitude % Not significant Accepted The above table showed that out of 58 respondents, 36 respondents opinion about the government is favourable, 15 respondents are given opinion about the government neutral and only 7 respondents opined that unfavourable. The Chi-square test result proves that the difference is insignificant because the Chi-square value is less than the corresponding table value at 5 per cent level. Hence, the null hypothesis is accepted. Effectiveness of the Spices Board Indian peppers are exported to almost all the countries over the globe. It is practically impossible for the individual exporters to know the overall demand or explore new export destinations or find solutions to all the practical difficulties in the export market. Hence, it is extremely essential to have a coordinating agency capable of alleviating the problems of exporters in the international market. In India, with the support of Spices Board, exporters have established adequate infrastructure for improving quality on a sustained basis. In this background, the exporters views about the effectiveness of the scheme offered by Spices Board are collected and presented in Table7.14 To test the association among the scale-wise exporters on effectiveness of Spices Board the following hypothesis is framed and tested. H 0 : Pepper exporters do not differ scale wise in assessing the effectiveness of Spices Board. 195

24 Table: 7.14 Effectiveness of Spices Board- Scale- wise (No. of Traders) Intensity/ Scales Always Sometimes Never Small 6 (46.2) 6 (46.2) 1 (7.7) (22.4) Medium 8 (32.0) 15 (60.0) 2 (8.0) (43.1) Large 12 (60.0) 4 (20.0) 4 (20.0) 20 (34.5) 26 (44.8) (43.1) 7 (12.1) 58 (100.0) Note: Figures within parentheses indicate percentage to total. Source: Primary Data Chi-Square test result Variables Chi- Square DF Level of Significance Table Significant Hypothesis Effectiveness of the Spices Board % Not significant Accepted As seen from the table, out of 58 respondents, only 7 respondents have not understood the effectiveness of Spices Board, respondents are answered sometimes effective and 26 responded as always effective. The chi-square test result proves that the exporters do not differ significantly on the matter because the calculated value is less than the corresponding table value at 5 per cent level. Therefore, the null hypothesis is accepted. 196

25 Problems in exporting pepper It is obvious that the exporters have to develop their programmes as an ongoing one in tune with the changing level of market acceptance. However, they face difficulties in identifying new markets and in promoting the products in identified market etc. Through preliminary discussions with the leading exporters the problems were identified. They were put to the respondents to rank them in order of merit, as perceived by them. The validity of the information was then ascertained by converting the numerical scores into rank orders the method suggested by Garrett E Henny (1973). This method is applied when using the number of items ranked differ from respondent to respondent. Following this rule the frequency of sample respondents has been multiplied with the Garrett table value. The total score was divided by the total number of respondents (58). Based on the mean score, the rank was given which is shown in Table

26 Table: 7.15 Problems encountered by the pepper exporters (No. of Traders) Problems Ranking score respondent Score Mean Score Rank A Upgrading Product Quality 640 (8) 335 (5) 540 (9) 530 (10) 150 (6) 80 (2) 192 (6) 240 (12) B Lack of Addition Facilities 400 (5) 402 (6) 540 (9) 583 (11) 175 (7) 160 (4) 352 (11) 100 (5) C Increased Regulatory Measures 960 (12) 536 (8) 660 (11) 159 (3) 300 (12) 240 (6) 96 (3) 60 (3) D Supply Chain Management 320 (4) 603 (9) 240 (4) 212 (4) 175 (7) 440 (11) 288 (9) 200 (10) E Price Factor 560 (7) 804 (12) 480 (8) 371 (7) 200 (8) 200 (5) 224 (7) 80 (4) F Promoting Brand Names 400 (5) 268 (4) 420 (7) 477 (9) 150 (6) 520 () 6 (8) 120 (6) G Intensified Competition 800 (10) 469 (7) 360 (6) 424 (8) 175 (7) 440 (11) 96 (3) 120 (6) H Exploring New Markets 560 (7) 469 (7) 240 (4) 318 (6) 1 (5) 240 (6) 352 (11) 240 (12) Note: Figures within parentheses indicate the number of respondents Source: Primary Data 198

27 Table 7.15 revealed the problems encountered by the exporters. It is observed from the table that increased regulatory measures was ranked first by respondents with the mean score of 51.91, Price factor was ranked as second with the mean score of Intensified competition was ranked as third with the mean score of Moreover, lack of value addition facilities (mean score of 46.76), upgrading product quality (mean score of 46.67), Promoting brand names (mean score of 45.02) and exploring new markets (mean score of 43.86) were ranked as fourth, fifth, sixth and seventh problems respectively. Finally supply chain management was ranked as eighth with the mean score of Since the mid-1990s, more general practices within the international spice industry, have stimulated a growing number of spice companies to adopt HACCP, ISO 9000 and other certified food safety or quality assurance management systems. The current patterns of pesticide use and regulatory enforcement and the presence of persistent organic pollutants were the challenge for Indian pepper exporters. Price has been the dominant factor in the black pepper trade, and India could retain only those buyers who have very specific recipes of formulations that they do not want to adjust by using pepper, supplied from elsewhere. The domestic market has easily absorbed the available supply, frequently at prices above international market level. Domestic producers would be adversely affected if Vietnamese or other international supply would accelerate and substantial larger low-cost supplies were to enter the domestic consumer market via imports. At the international commercial level, pepper exporters had been encountering intensified competition in the market especially for black pepper. Their ability to 199

28 compete on the basis of cost was constrained by the relative dynamism of its own domestic market and by comparatively low yields at the farm level. There is a growing perception that the future growth potential of Indian spices lies in offering the range of spice oils, dehydrated products and oleoresins. But the exporters were not having adequate facilities to do value addition. In the late 1980s and early 1990s, several spice exporters began to upgrade their black pepper cleaning and preparation systems virtually, all operations had been done by hand, with pepper being shaken through sieves, hand-washed, sun-dried and hand-packed in sacks. Of late, exporters have started mechanical cleaning, washing, drying and packing equipment as US and other buyers offered modest price premiums for this cleaner and better- graded product. But this amounted to increase the operating cost of the product. The growth potential for packaged consumer products is expected with the promotion of Indian or joint venture brand names. A few Indian companies have been supplying packed consumer products to the Middle East. The Spices Board has commissioned studies to examine the feasibility of developing and promoting Indian branded products. The combination of increased farmer awareness, improved post-harvest practices, company investment in processing/ cleaning/ sterilization equipment and improved management practices, and the EIC inspection system have helped to limit the further incidence of quality/ cleanliness problems in black pepper over the past decade. 200