G.K. Nair

Kochi, Aug. 22

THE Union Commerce Ministry is seriously considering to impose quantity restrictions or some duty on import of pepper from Sri Lanka now done under FTA to arrest flooding in the domestic market.

As part of this exercise, a high-level delegation is likely to visit Sri Lanka next month to sort out the issue, Ministry sources told Business Line. Large quantity of Sri Lankan pepper is landing in the domestic market imported duty free by the trade and industry here. According to trading sources, given the current import trends an estimated 20,000 tonne of pepper of foreign origin would land in the country.

During January-June 2005, 9,651 tonnes of black pepper was imported against 7,726.98 tonnes in the corresponding period in 2004 and 5,196.98 tonnes in 2003. A significant quantity of the imported pepper is feared to have entered the internal market, which in turn has depressed the domestic price, they alleged.

Though the Government had taken some measures to arrest this inflow they do not seem to have made any positive impact so far, they claimed.

Some of the exporters had already appealed to the Kerala Chief Minister, Mr Oommen Chandy, to take up the issue with the Prime Minister. They said to protect the interest of the pepper farmers "imports from Sri Lanka needs to be restricted by quantity to 3,000 tonne for extraction units only or a duty may be imposed, if quantitative restriction application is not possible under bilateral agreement. Now, light pepper imports have been reinstated as per the Public Notice No. 17 dated June 7, 2005, but unfortunately the order has missed out import extraction units only of light pepper."

Even these imports, which were supposed to have been strictly monitored by DGFT and the Spices Board on quality to ensure that only light pepper is being imported, customs have not yet started sending samples of imported pepper to the Spices Board for checking the quality of the pepper imported under Advance Licence, they alleged.

In spite of the Kerala Government's market intervention exercise by procuring 4,755 tonnes from small and marginal farmers at a support price of Rs 75 per kg, pepper prices have shown a declining trend as cheap imports are continuing unabated. The Union Government to protect the interests of the pepper farmers had imposed 70 per cent duty on imports. But, while framing the bilateral trade agreement with the SAARC countries, which include Sri Lanka, pepper import from that country was neither deleted nor put under negative list. This has resulted in large quantities of black pepper being "flushed into India through various ports as well as Internal Container Depots." These imports from Sri Lanka do not attract any State levies such as Sales Tax/VAT, while indigenously produced pepper attracts such levies at each State of production (Kerala, Karnataka and Tamil Nadu). This phenomenon had made the domestic pepper "totally uncompetitive" in price in the domestic market," they pointed out.

(This article was published in the Business Line print edition dated August 23, 2005)
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