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Indian chili exporters in a bind over delay in dues from Sri Lanka

An economic crisis in Sri Lanka has pushed chili exporters from India into deep trouble as the importers in the island nation are unable to clear dues. 

Chili importers in Sri Lanka have reportedly not paid dues to Indian traders for the past several months, leading to a crisis in the chilli market in India, the Times of India reported. 

Sources said exporters have been struggling to collect over INR 250-300 crore from their Sri Lankan business partners. 

However, no exporter is willing to lodge a complaint against the defaulters as they fear it might complicate debt collection.

Sri Lanka is one of the biggest importers of Indian chili stocks, mainly from Andhra Pradesh. According to trade analysts, AP farmers produced over three crore bags of dry red chili during the last crop season. 

This is equivalent to nearly 1.4 crore quintals of production and considered to be the highest production in the past decade. The country’s total chili production is around six crore bags or nearly three crore quintals.

Guntur, Krishna and Prakasam contribute over 70-80 per cent of the state’s total chili production. 

Thanks to the presence of the biggest agriculture market yard, big merchants, including exporters, handle business transactions from Guntur.

Riding on a bumper crop and huge demand, merchants from AP exported over one crore quintal of stock to different nations during 2020-21, of which over 30 per cent went to Sri Lanka. “Sri Lanka, Bangladesh and China are the biggest importers of chili from AP. Each nation picks up at least 25-30 lakh quintals of stock every year. 

However, prices offered by the Sri Lanka traders are higher compared to prices by China merchants,” said a leading chili exporter Ch Venkateswara Rao.

Experts said Sri Lanka’s economic crisis was the result of poor tourism activity since the outbreak of Covid-19 in 2020. The island nation’s decision to make a sudden shift to organic farming practices is said to have further crippled its economy. 

Many big business houses in the country are said to be struggling to overcome the crisis, resulting in payment delays to importers of agricultural produce.

Sources said big chili exporters from AP are waiting to get around 300 crore from their business partners. This is said to have led to many exporters failing to clear their dues to bankers and small merchants who offered stocks to them.

“We are hopeful of finding a solution to the crisis through mutual negotiations. We will seek support from the external affairs ministry, if needed,” said an exporter.

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