Our Bureau

Mumbai, July 31

STUNG by the large inflow of vanaspati (hydrogenated vegetable oil) from Sri Lanka despite there being no justification for such imports, the already enervated Indian vanaspati industry has demanded a level-playing field that would allow domestic units to face unfair competition from imports.

The Vanaspati Consultative Committee (apex body of the Indian vanaspati industry formed by two concerned associations) has demanded that either vanaspati imports from the southern neighbour be put in the `negative list' or the domestic industry should be allowed crude palm oil imports at 20 per cent duty as against the present duty of 80 per cent.

The domestic industry has contended that it is being forced by the policymakers to wage a losing battle against imports from Sri Lanka under the Indo-Sri Lanka bilateral trade agreement that envisages duty-free imports of specified products, including vanaspati.

Ironically, a significant part of investment in vanaspati manufacturing facility in Sri Lanka is from Indian companies, which are benefiting from a liberal investment climate there. Sri Lanka is not a major producer of vegetable oil. However, imports are allowed duty-free for export production of vanaspati.

Units in Sri Lanka import crude palm oil at zero duty, process it into vanaspati and export to India. On the other hand, crude palm oil when imported into India attracts 80 per cent customs duty. Clearly, it is an unequal fight between vanaspati exporters in Sri Lanka and Indian producers.

In relation to imports, the domestic industry is perturbed by two major lacunae. One is the suspected flouting of value-addition norm and the other is the non-adherence to rules of origin. It is unclear how value addition (prescribed at 35 per cent) is assessed. Many suspect low value addition in reality.

The Directorate of Vanaspati should be asked to probe if the value addition norm is being followed or flouted by Sri Lanka and such probe should not only be transparent but also to the satisfaction of the domestic industry, according to a producer.

The role of customs authorities is also unclear. Border inspection of imported cargo seems to be lax.

Domestic vanaspati units are facing unfair competition from Nepal in the North and Sri Lanka in the South. The Government's response to their pleas has been lukewarm, if anything.

(This article was published in the Business Line print edition dated August 1, 2005)
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