A revival in betel leaf export from India has been marred by the imposition of 18 percent Goods and Services Tax (GST) on air freight. Exporters fear this may allow India’s main competitor Bangladesh to gain an upper hand in the export markets, particularly the UK, which, with the presence of a large Asian population, has become the top buyer of Indian betel leaves.

Earlier, Pakistan used to be a big consumer of Indian betel leaves which went from Kerala and other places. But the shipments thinned after the Kargil war and gradually stopped, as relations between the two countries soured and Pakistan imposed higher duty for Indian betel leaf.

The market for betel leaf, which is used in paan and as mouth fresheners, in India is concentrated in Kolkata from where it is taken to several countries by air. It goes to Bangladesh, a significant buyer, by road. The UK, Europe, Saudi Arabia, and Oman are the other chief destinations.

Betel leaf exports saw a surge after the registration of exporters for shipments to the UK and European Union (EU) came under the Shellac and Forest Products Export Promotion Council (Shefexil) from September 2021. The council became the competent authority to issue the health certificate, instead of the Agricultural and Processed Food Products Export Development Authority (Apeda).

India exported $6.18 million worth of betel leaves in FY22, compared to $3.56 million in the previous year. The industry reckons that the export would have more than doubled this year if the GST on air freight had not been enforced. Interestingly, there is no GST on betel leaves.According to Dr Debjani Roy, Executive Director of Shefexil, 630 consignments amounting to 378 tonnes of betel leaves were shipped from February to November 2022 to the UK and France without any rejections for salmonella.

Indian betel leaf consignments had faced rejections due to the presence of the bacteria salmonella from the UK and Europe in the last few years. “After it came under Shefexil, we have competently addressed the issue of salmonella by educating the farmers and streamlining the production and testing procedures for issuing the health certificate,” Roy said.

The price realisation for export is more now as it is sent directly. When they did not get health certificates from Apeda, the exporters used to send the consignments to Sri Lanka, Thailand or Malaysia and re-export it to the UK or Europe changing the origin. Since this involved additional expense, it affected the export margins.Bangladesh, which also exports betel leaf to the UK and Europe, could be the chief gainer because of the 18 percent GST charged on air freight by the government of India from October 2022. “We purchase the leaves at about Rs 210 per kg from farmers. And after adding all the expenses, we sell at Rs 300 per kg. GST is on top of this. Bangladesh doesn’t have GST and their production has increased, allowing the country to export at cheap rates,” said prominent exporter Premjit Adak, adding that it has led to a decline in Indian shipments in the last two months.

The traders and the exporters have taken up the issue with the government. “The government says they will refund the GST money. In that case, why should they impose it in the first place. As a result, the exporters are facing cash flow problems,” said Ankush Saha, Director of JGB Agrofresh Pvt Ltd.West Bengal is now the leading producer of betel leaf in India. It is also grown widely in southern and northeastern states. E Arun, Partner of Suraj Trading, based in Kerala, buys betel leaf from the Kolkata market and exports it to Israel. “Since it is cultivated round the year in West Bengal, availability is not a problem. We do two shipments of around 200 kg a week. It is consumed by the Indians and other Asians in Israel,” he said.

In places like Kerala, the cultivation is seasonal with arrivals limited to the January-April period. Betel leaves from Tirur in Malappuram district of Kerala used to be much favoured in Pakistan fetching high prices. “Around 10 tonnes used to go from Tirur a week during the heydays of export. It was a lucrative business and leaves used to fetch Rs 1,300 to Rs 1,400 per kg,” Arun said. Pakistan’s betel leaf market has been captured by Sri Lanka. Betel leaf from Tirur now goes to states like Uttar Pradesh, Gujarat, and Rajasthan for making paan.