Proposed Duty Seen as Disincentive to Local Cashew Processing

Bangladesh's cashew processors warn that proposed tariff changes in the FY2026-27 budget could make imported finished cashews cheaper than local products, threatening the domestic industry's survival.

The proposed measures create an "inverted duty structure." They increase taxes on imported raw cashews while allowing finished cashew imports from India to maintain tariff preferences under the South Asian Free Trade Area (Safta) agreement. Industry leaders argue this puts around 20 local factories at risk and jeopardizes massive planned investments.

Local processors need five kilograms of raw, in-shell cashews to produce one kilogram of finished kernels. The proposed budget imposes a 15% customs duty and 15% VAT on raw cashew imports, jumping the total tax burden from 13.58% to 40.38%. Meanwhile, finished cashews imported from India enjoy Safta benefits, softening the blow of any duty hikes.

Industry data submitted to the National Board of Revenue (NBR) shows this structure would push local production costs to Tk1,725 per kilogram. In contrast, finished Indian cashews would cost around Tk1,282 per kilogram—creating a price difference of Tk443.

"If this structure remains, factories will shut down. Importers will sell finished products far below our production costs," said Robiul Islam Azad, managing director of Green Harvest Fresh Produce Ltd.

Because local production is insufficient, Bangladesh imports most raw cashews from African nations outside Safta, meaning processors pay full customs duties.

NBR officials defend the tax hike, stating it protects local farmers and ensures better prices for domestic crops. However, processors say local supply simply cannot meet demand.

Bangladesh produces about 2,000 tonnes of raw cashews annually against a demand exceeding 15,000 tonnes. The country consumes roughly 3,000 tonnes of finished cashews each year; local processors supply only 800 tonnes, while imports cover the rest.

"To maintain current output, processors need over 4,000 tonnes of raw cashews. Local production covers half of that. Imports are a necessity, not a choice," said BSRM Group Deputy Managing Director Tapan Sengupta. Industry Seeks Supplementary Duty

The domestic cashew sector emerged a decade ago, largely in the Chattogram Hill Tracts, but has continually struggled against cheap imports. Entrepreneur Shakil Ahmed Tanvir closed the country's first commercial plant in 2022 due to sustained financial losses.

Despite these challenges, major conglomerates have recently entered the market. BSRM opened a Chattogram plant in 2023 and plans a Tk157 crore facility in the Mirsarai Economic Zone. Kazi Farms has also slated a Tk181 crore investment. Industry leaders warn these projects may be shelved if the proposed tariff structure passes unchanged.

To level the playing field, processors suggest imposing a 20% supplementary duty on imported finished cashews rather than raising customs duties on raw materials. A supplementary duty would apply equally to all imports, bypassing Safta loopholes.

"Raising customs duty alone won't work because Safta dilutes the impact. A supplementary duty ensures fair competition and prevents cheaper imported kernels from dominating the market," said Mohammad Azad Iqbal Pathan, president of the proposed Bangladesh Association for Cashew Processors.