Free trade pacts turning a tool to dump spices
Hindu Business Line
Free trade pacts turning a tool to dump spices
G.K. Nair
Kochi, July 11 2005
EVER since the Free Trade and Preferential Trade Agreements (FTA/PTA) between India and its neighbours have come in to force, spices that are not even grown in these countries are landing here as produce of those nations.
Spices qualified for import under FTA/PTA such as pepper, cardamom (small), clove, star anise etc, are arriving in the Indian market as produce of Nepal, Pakistan and Bangladesh, despite the fact these are not produced in these countries.
Meanwhile, Sri Lanka is allegedly shipping pepper in quantities over and above its production levels to India under the FTA.
Such imports are depriving the country of revenue and the growers of remunerative prices, besides negatively affecting the trade, according market analysts here.
Import of cloves had come to the notice of the Spices Board late last year when the Kochi Customs detained a consignment of 24 tonnes of cloves imported from Pakistan by a Bangalore-based company, suspecting its country of origin, and sought clarifications from the Board. It was confirmed later that cloves are not grown in Pakistan, official sources told Business Line.
Besides, cardamom (small) is arriving from Nepal and Bangladesh as their produce.
Indian traders who import such commodities for domestic consumption from their neighbours get 90 per cent concession on the 70 per cent duty imposed by the Government.
Given this scenario, the time has come now that import under FTA/PTA from the neighbouring countries "should be limited to their produce and any thing other than this should not be permitted under the trade agreements". Besides, the concerned notified agency needs to be advised not to issue the country of origin certificate for export under FTA/PTA, they pointed out.
Another tactic to deprive the country of the revenue is the under valuation of the spices imported under OGL, they said.
Based on reports, even the Spices Board had suggested to the Union Commerce Ministry to fix import tariff instead of levying the import duty on c.i.f value of the import consignment on similar duty structure the country has for importing almonds.
According to official sources, during April, it was reported that Mumbai customs had cleared around 22 tonnes of cardamom at Rs 88.98 per kg and Tuticorin customs had cleared around 22 tonnes at Rs 82.31 per kg as against the average auction price of Rs 300.84 a kg during April. More consignments (small cardamom) were also cleared at very low price from other ports viz, Kochi and Nhava Seva during April and May. Hence, the Board had suggested that the average auction price be taken as the base price for levying the import duty.
Earlier, a Delhi-based company had imported 303 tonnes of cloves and 206 tonnes of steam cloves through the Kochi port from March 15 to June 29, 2004 under Advance Licence scheme.
The value of 103 tonnes of cloves imported through this port during June 22-29, 2004 was assessed as per bills of entry and that came to around Rs 1.39 crore. The value of the produce given in the invoice was Rs 74.92 a kg and at a normal duty rate of 70 per cent, the import duty amounted to Rs 52.44 a kg. However, under concession, the importer has to pay only at Rs 5.25 a kg. At this rate, there was a tax evasion of Rs 11.32 lakh, the sources pointed out.
The lacuna in the policy is that when grading, simple cleaning, re-packing of the imported spices under Advance Licence Scheme requires only 30-45 days. And yet, permission has been given for a period of 180 days for fulfilling the export obligation that too with only positive value addition, which disturbs the domestic market for spices.
Therefore, they urged the authorities that a minimum period may be considered for fulfilling the export obligation.
Meanwhile, a Delhi-based company not registered with the Spices Board had imported spices under Advance Licence for value addition and re-export violating the Exim policy provision. The Board had initiated action against the company, as under the policy provisions, "any manufacturer, who desires to process clove oil/cassia oleoresin/masala should obtain a manufacturing capacity certificate (after assessing the processing facilities) from the Spices Board for import of these under the Advance Licence Scheme".
