Biodiversity levy: Domestic herbal units may lose out to China

The Kerala State Biodiversity Board’s recent notification demanding levies for sourcing raw materials domestically has put the spices and plant-based product exporters, who are commercially utilising biological resources, in a fix.

Bevy of levies The Board, through the provisions in Biodiversity Act 2002, had asked companies sourcing raw materials domestically to pay a 3-5 per cent levy as raw material cost.

Besides, the demand to remit another 0.5-1 per cent of the total turnover to the National Biodiversity Board towards “fair and equitable benefits sharing” has put exporters into doldrums, said PJ Kunjachan, Managing Director of the Kerala-based Arjuna Natural Extracts Ltd, manufacturers and exporters of spices and herbal extracts and Omega-3 fish oil.

Added to this, the Board’s demand to pay royalty, to the tune of 0.2-1 per cent of the turnover for commercialising the patent product has also been impacting companies, he said.

As a result, the exporters may find it difficult to compete with Chinese herbal products in the emerging scenario. All these measures have put additional financial burden in procuring raw materials from domestic suppliers whereas there are no such restrictions in the Act for imports , he said.

Imports may rise This will affect the farmers in a big way, as it would force the domestic companies to look for raw material imports. Even though the intention of the Act was to preserve the India’s biological diversity, it fails to address its impact on raw material procurement from foreign suppliers.

The Kerala Biodiversity Board, formed in 2008, had issued a notification that came into effect from November 21, 2014 directing beneficiary companies to pay various levies.

When contacted Sushama Sreekandath, Director and CEO, AVT McCormick, said that the Biodiversity Act does not apply to condiments company and it pertains only to drug manufacturing, extractions, cosmetics, oleoresins and enzyme manufacturing units among others.

T Sreekumar, Deputy General Manager ofKochi-based oleoresin extract company AK Flavours and Aromatics Pvt Ltd, said that they have not yet received any notices so far. The 100 per cent EOU is sourcing turmeric, chilli and pepper both domestically and by imports. In case of receiving any such notices, Sreekumar said the only option to look for raw material is imports.

Benny Antony, Joint Managing Director, Arjuna Extracts, said that the restrictions coupled with exorbitant taxes have forced many Indian companies to set up units abroad to meet the competition. “Such regulations can be demoralising and de-motivating for a company like ours who have invested heavily on R&D,” he said.

Bulk supplies Given the domestic production requirement which is estimated at one lakh tonnes, several countries such as Vietnam, Indonesia, Burma, Sri Lanka have already started supplying turmeric in bulk to nutraceutical and natural colours manufacturing companies.

In India, more than 7,000 medicinal plants have been identified whereas the figure in China was only 3,000. Given this scenario, he said the government should encourage domestic production under its prestigious Make in India programme.

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