Budget tax proposal lifts spirit to long-pending feni project in Kannur

Even as the Kerala government’s proposal to have a low sales tax rate on low-alcohol beverages has triggered sharp criticism from a section within the ruling United Democratic Front and the Opposition Left Democratic Front, it has revived hopes for the long-pending ‘Kannur Feni’ project of Payyavoor Service Cooperative Bank, which is awaiting final approval from the Excise Minister after nearly a decade of regulatory and administrative processes.

The Excise department has completed inspections of the project, conceived to manufacture Kannur Feni (K-Feni), and the proposal has been forwarded by the Excise Commissioner. The final approval now rests with the Excise Minister, says T.M. Joshy, president of the cooperative bank.

Mr. Joshy says the proposal was formally submitted during the tenure of the last two LDF governments. However, the project had remained stalled over the issue of taxation.

The proposed beverage will have an alcohol content of about 20%. Under the Revised Budget proposal, beverages with alcohol content ranging from 10% to 20% would attract a sales tax of 175%, much lower from the 251% charged on hard liquor. “The proposal will significantly improve the project’s commercial viability,” Mr. Joshy says.

The bank plans to establish a distillery at Kunhiparamba, near Payyavoor, on 2.5 acres of leased land, with an initial production capacity of 1,000 litres a day. It plans to market the product through the Kerala State Beverages Corporation with an expected retail price of around ₹500 a litre, subject to the final tax structure.

Mr. Joshy says the project is aimed at improving farmers’ income by making use of cashew apple, now largely discarded, into a value-added product. The society plans to procure the fruit at ₹8 a kg, enabling growers to earn an additional ₹88. Approximately 11 kg of cashew apple comes along with one kg of cashew nut.

“With cashew nut prices touching ₹162 a kg this season, farmers could realise nearly ₹250 a kg from the combined produce,” he says adding that export of the finished product could raise the return to nearly ₹300.

The proposed unit will require nearly 10 tonnes of cashew apple a day. The plan is to source the fruit through a procurement network across Kannur district, with future expansion to Kasaragod and Kozhikode through other cooperative societies and banks,” Mr. Joshy says.

Bank secretary M.V. Rajesh Kumar says the project has been delayed because Kerala lacks a regulatory framework for cashew apple feni production like Goa. Besides creating a stable market for cashew apple, the project is expected to generate jobs in harvesting, collection, transportation and processing, while encouraging farmers to continue cultivating cashew.

“While cashew nut prices fluctuate, the value-added product is expected to provide stable returns, encouraging farmers to continue cashew cultivation instead of shifting to other crops,” he says.