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G.K. Nair

Kochi , June 3

THE blanket ban on sale of pepper and pepper products in the domestic tariff area (DTA) by export oriented-units (EOU) would be detrimental to their commercial viability as they would have to sell the by-products generated during the production process in DTA, according to Mr M.S.A. Kumar, Managing Director, AVT Natural Products and AVT McCormick Ingredients Ltd at Vazhakulam near here.

"During the production process, we also generate products, which don't meet the overseas customer's specifications but meet domestic market specifications. EOUs also generate by-products, which can be sold only in DTA", Mr Kumar, who has taken up the issue with Union Commerce Ministry, told Business Line on Friday.

The Ministry by the Notification No 2 (RE-2005)/ (2004-2009) dated May 13, 2005, has disallowed sale of pepper and pepper products by the EOUs in DTA. But, the procedure for disposal of non-conforming products and by-products by these units was not clearly spelt out in the notification, he said.

Describing the decision as "very unjust and uncalled for measure", he said that the fall in pepper prices in the world market was due to the unprecedented increase in world production from 2,54,000 tonnes in 2000 to 3,40,000 tonnes in 2004.

World demand and consumption has not kept pace with this 34 per cent growth in production, which is largely due to the entry of Vietnam, whose production was around 1,30,000 tonnes in 2004.

"Even assuming that EOUs do sell large quantities of pepper in the domestic market, as is feared, the duty structure on it is very high at 50 per cent for imported raw material and 30 per cent for indigenous raw material of relevant customs duty of 70 per cent.

"This structure translates to an effective duty of 35.7 per cent or 21.42 per cent (including education cess of 2 per cent). As against this, pepper sold by DTA units does not suffer any excise duty," he claimed.

On other hand, as per the Indo-Sri Lanka Free Trade Agreement, (ISFTA) any Indian trader can freely import pepper duty-free from Sri Lanka without any restriction.

These imports are neither monitored nor checked, and this scheme had a greater potential to impact domestic pepper prices than the imports made by the 100 per cent EOUs, he said.

In fact, sufficient safeguards are already in place to ensure that there are no leakages, either from the EOUs or SEZ units.

As such, there "is no need to take such a draconian step of denying EOUs the permission to sell into the DTA".

He has requested the Union Commerce Ministry to allow the EOUs to sell 50 per cent of pepper and pepper products in the DTA at concessional duty as was the case earlier.

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