Proposed duty seen as disincentive to local cashew processing
It would make locally processed cashews costlier by Tk471 per kg than imported ones
Highlights:
- Budget changes may undermine Bangladesh's local cashew processing industry
- Raw cashew import taxes rise from 13.58% to 40.38%
- Indian finished cashews retain tariff advantages under Safta agreement
- Local processing costs could exceed imports by Tk471 per kilogram
- Around 20 factories and major investments may face risk
- Industry proposes 20% supplementary duty on imported finished cashews
Bangladesh's cashew processing industry leaders have expressed concern over proposed tariff changes in the FY2026-27 budget, warning that the new structure could make imported finished cashews cheaper than locally processed products and threaten the viability of domestic processors.
Industry leaders say the proposed measures create an inverted duty structure by increasing the tax burden on imported raw cashew nuts while allowing finished cashew imports from India to continue benefiting from tariff preferences under the South Asian Free Trade Area (Safta) agreement.
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They argue that the policy could put around 20 processing factories at risk and discourage planned investments worth hundreds of crores of taka.
The issue involves two categories of products – raw cashew nuts in shell, which are used by local processors, and shelled cashew kernels, the finished product sold in the market.
Industry insiders say five kilograms of raw cashew nuts are required to produce one kilogram of finished kernels.
Under the proposed budget, imports of raw cashew nuts in shell would be subject to 15% customs duty and 15% VAT, raising the total tax incidence from 13.58% to 40.38%.
At the same time, imported shelled cashews, particularly from India, would continue to receive preferential treatment under Safta reducing the impact of higher customs duties.
According to industry calculations submitted to the National Board of Revenue (NBR), the proposed structure would raise the cost of producing one kilogram of locally processed cashew kernels to about Tk1,725.
In comparison, imported finished cashews from India would cost around Tk1,282 per kilogram, creating a price difference of nearly Tk471.
Processors say such a gap would make local production commercially unsustainable.
"If this structure remains unchanged, factories will be forced to shut down as importers will be able to sell finished products at prices far below our production costs," said Robiul Islam Azad, managing director of Green Harvest Fresh Produce Ltd.
He said Bangladesh imports most of its raw cashew nuts from African countries because local production is insufficient.
"Bangladesh imports raw cashew mainly from African countries because domestic production is insufficient. These countries are outside Safta so we have to pay the full customs duty. Importers of finished cashews from India, however, benefit from preferential tariffs," he said.
NBR officials have defended the proposed measures, saying local farmers need protection from cheaper imports and should receive better prices for domestically grown cashews.
However, processors argue that domestic production remains too low to support such a policy.
Industry estimates show Bangladesh produces about 2,000 tonnes of in-shell cashew nuts annually, while demand exceeds 15,000 tonnes.
The country consumes around 3,000 tonnes of shelled cashews each year, of which local processors produce about 800 tonnes and imports account for the remaining 2,200 tonnes.
"Even for existing production, processors need over 4,000 tonnes of raw cashew nuts annually. Local production is only around half that amount. Imports are therefore a necessity, not a choice," BSRM Group Deputy Managing Director Tapan Sengupta said.
Industry seeks supplementary duty
Bangladesh's cashew processing industry emerged about a decade ago, supported by growing cultivation in the Chittagong Hill Tracts and other regions.
However, processors say they have long struggled to compete with imported products.
Entrepreneur Shakil Ahmed Tanvir, who established the country's first commercial cashew processing plant, said the facility ceased operations in 2022 after years of losses.
"Local processors have long faced unfair competition from imported kernels sold at prices below domestic production costs," he said.
Despite those challenges, several large companies have recently invested in the sector.
BSRM launched a processing plant in Chattogram in 2023 and announced plans to invest Tk157 crore in a larger facility at the Mirsarai Economic Zone.
Kazi Farms has also announced plans to invest Tk181 crore in a similar project.
Industry representatives warn that these investments could be delayed or reconsidered if the proposed tariff structure is finalised without changes.
They argue that increasing customs duties alone does not provide effective protection because imports from India continue to receive concessions under Safta, while raw cashew imports from countries such as Tanzania, Benin, the Ivory Coast and Ghana remain subject to the full duty burden.
To address the issue, processors have proposed imposing a 20% supplementary duty on imported shelled cashews instead of increasing customs duty.
They say a supplementary duty would apply equally to all imports and would not be offset by Safta preferences.
"Raising customs duty alone will not solve the problem because Safta reduces its impact. A supplementary duty would ensure fair competition and prevent cheaper imported kernels from dominating the market," said Mohammad Azad Iqbal Pathan, president of the proposed Bangladesh Association for Cashew Processors.
Industry leaders argue that conventional tariff comparisons fail to account for the economics of cashew processing. According to Robiul Islam Azad, the global average kernel outturn ratio is only 22%, meaning processors recover just 20-24 kilograms of edible kernels from every 100 kilograms of raw cashew nuts. "Because more than four kilograms of raw cashew nuts are required to produce one kilogram of kernels, the tariff on imported finished cashews should be at least 4.5 times higher than the duty on raw materials. Otherwise, local processors cannot compete with imported kernels," he said.
