Vanaspati firms feel free trade heat
The Telegraph, Calcutta, 8 January 2006
Vanaspati firms feel free trade heat
GAURAV CHOUDHURY
New Delhi, Jan. 8: In what could be one of the first adverse fall-outs of free-trade agreements, domestic vanaspati producers have alleged that India is turning out to be a major market for imports from Sri Lanka, Nepal and Bhutan, although these countries have no major cultivation of oilseeds.
Under the India-Sri Lanka Free Trade Agreement (ISFTA), which came into effect from March 2000, vanaspati could be imported into India from the island nation at zero duty provided there is a value addition of at least 35 per cent.
However, Indian vanaspati producers have alleged that this provision, referred to as rules of origin, is continually being violated even after a government-appointed panel has reported the contravention.
Significantly, there are as many as 10 vanaspati exporting units in Sri Lanka owned and operated by Indians. “No major oilseed is cultivated or grown in Sri Lanka, Nepal or Bhutan. The free trade agreements have effectively converted these countries into conduits for import of a third country material duty free into India,” said Pradeep Garg of All-India Vanaspati Industries Sangharsh Samiti.
An estimated 4 lakh tonnes of vanaspati is being imported in India from Sri Lanka, Nepal and Bhutan annually.
Domestic vanaspati producers said as many as 120 units have been forced to shut shop as cheap imports flooded the market. Indian producers have to pay a duty of 81.6 per cent on crude palm oil - the core ingredient of vanaspati - resulting in an unequal playing field vis-à-vis the imported produce, said Garg.
He added that the price competitiveness of Indian producers have eroded forcing most of the units to operate on an extremely low capacity. “Presently, the average capacity utilisation is as low as 20 per cent and nearly half of 260 producers in the country are on the verge of a closure,” he said.
