Vanaspati import from Sri Lanka plummets

TAMING INFLATION

Customs duty cut on crude palm oil takes a toll.

What repeated requests and representations failed to do for the domestic vanaspati industry, the rising inflation has done. The cut in Customs duty on crude palm oil (CPO), vanaspati's main raw material, from 45 per cent to nil in last one month has brought the duty-free vanaspati import from Sri Lanka and Nepal to an end.

"This is a positive development for the industry. Whatever market share was enjoyed by the imported vanaspati would now come to the domestic players," said S C Agarwal, senior executive director of Amrit Banaspati Company, which sells vanaspati under the Gagan brand.

According to 1998 Free Trade Agreement (FTA) with India, Sri Lanka could export 250,000 tonnes duty-free vanaspati to India while the Indo-Nepal treaty allows 100,000 tonnes of duty-free vanaspati import from Nepal.

Vanaspati producers in these two countries enjoyed huge cost advantage over their Indian counterparts as they import CPO duty free, while Indian units until recently had to pay a high duty.

The combined import of 350,000 tonnes accounted for almost 25 per cent of Indian's annual vanaspati consumption, estimated at 1.4 million tonnes.

The import duty on CPO has come down from 88.8 per cent in August 2006 to zero. In the last one month, it has been reduced from 45 per cent to nil with a view to tackle the rising inflation.

Before the latest rounds of duty cut, a 15-kg vanaspati tin was selling at Rs 1,050 and one could import Sri Lankan vanaspati at Rs 1,000 (landed cost). With the duty cut, the price in India has slipped to Rs 850 while the landed cost of Sri Lankan vanaspati has remained largely unchanged.

"All along, the domestic industry had been pleading for a level-playing field. A gap has been created since import from Sri Lanka and Nepal remains no longer feasible. This gap can now be met by the domestic industry. This would also improve the capacity utilisation of domestic units, said S P Kamrah, secretary general of the Indian Vanaspati Producers' Association.