The Hindu Business Line : Govt slaps safeguard duty on tapioca starch

In a notification dated February 16, the Director-General(Safeguards) has recommended 33 per cent safeguard duty on tapioca starch imports in the first year on ad valorem basis; 23 per cent in the second; and 13 per cent in the third year. This would be in addition to the existing 30 per cent Customs duty.

Under World Trade Organisation rules, Article XIX (of the General Agreement on Tarrifs and Trade 1994) provides for safeguard measures (i.e. emergency import curbs) to counter sharp increases in imports. Under this, import curbs may be imposed if certain conditions are met - no discrimination in application, provision of compensation or acceptance of counter- measures.

Where the duration of a safeguard measure exceeds one year, the member applying the measure is obliged to gradually liberalise it. Where the duration of the measure exceeds three years, the member applying it is obliged to conduct a mid-term review.

Second, the right of exporting countries to take countermeasures to safeguard action is restricted for a certain period under the following terms and conditions.

While invoking import restrictions under the safeguard provisions, an importing country is required to make efforts to provide some sort of compensation to exporting countries, usually in the form of a tariff reduction on other items. If adjustments are not agreed upon in bilateral talks, and the importing country invokes safeguards not withstanding, exporting countries may have recourse to retaliatory measures.

However, no safeguard has been recommended on imports of sago based on tapioca and modified starches.

Safeguard investigation was initiated in July 2004 on imports of starch, cassava/tapioca based sago and modified starches.

This followed a representation to the Finance Ministry by the farmers and farmers' associations of Tamil Nadu and Tamil Nadu Sago and Starch Manufacturers' Welfare Association, Salem.

They had represented that imported starch cost less than the domestic product, which affected the local producers.

Imports of tapioca starch touched 11,100 tonnes in 2003-04 from 428 tonnes in 2001-02.

Estimates for 2004-05 based on the first quarter indicate that tapioca starch imports could touch 16,555 tonnes.

The major sources are Thailand, which accounts for about 66 per cent, and Vietnam, which supplies about 33 per cent.

Domestic production dropped to 62,703 tonnes in 2003-04 from 90,806 tonnes in 2001-02.

In a representation to the Union Finance Ministry, the domestic producers said the livelihood of over 700 tapioca starch and sago manufacturers, of whom 448 active units based in Tamil Nadu, was under threat.

They contribute about 90 per cent of India's tapioca starch and sago production.

In addition, about five lakh families of farmers and labourers are engaged in tapioca cultivation in Tamil Nadu. Investments in this industry are estimated at about Rs 300 crore.

Based on the findings during the investigation, the Director-General found that increased imports had the potential to cause serious injury to domestic producers.

The Tamil Nadu Government had also represented to the Centre in February to hike import duty on tapioca starch, sago, and modified starch and exclude them from the free trade agreement with Thailand.

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