Yechury seeks review of import duty on Vanaspati

CPI (M) leader Sitaram Yechury has written to finance minister P Chidambaram asking for a level-playing field for the domestic vanaspati industry vis-à-vis cheap imports of vanaspati from Nepal and Sri Lanka.

Yechury has forwarded a representation from the West Bengal Vanaspati Producers Association, which states that a major crisis has overtaken the domestic industry due to the import duty differential.

The association has said that as a result of this duty differential, Nepalese vanaspati is cheaper by Rs 240 per 15 kg tin (or Rs 16 per kg). "At present, Nepalese vanaspati is selling cheaper by Rs 80 per tin in the Indian market", it said.

The association has said that 18 new factories had been set up in Nepal. These factories have an estimated production capacity of 100 metric tonnes per day, which translates into an annual capacity of 5,40,000 metric tonnes per year.

There has been a surge in the exports of Nepalese vanaspati to India with the estimated exports at 4 lakh metric tonnes in 2005-06, as per the association estimates. From 1976-96, exports from Nepal totalled 1410 metric tonnes, which was up to 2,07,337 metric tonnes by 2001-02.

"The Indian vanaspati units are shutting down one by one. Of the 260 units in the country, close to 120 units have already been shut down. The number of affected workers stands at 3 lakh, with the revenue loss to the government at Rs 1,850 crore. The average capacity utilisation has fallen by 20 per cent", the association has added.

Against the current market demand of around 20 lakh tonnes of vanaspati per year in the country, the market share of domestic producers stands at 12 lakh tonnes per year.

Last June, the government had issued a notification directing that all vanaspati imports from Sri Lanka under the Free Trade Agreement would be routed through Nafed.

The decision to canalise these imports was taken after India's offer to introduce a tariff rate quota (TRQ) of 2.5 lakh metric tonnes for vanaspati, bakery shortening and margarine was not accepted by Sri Lanka.

The island country wanted a TRQ of 2.5 lakh million tonnes for vanaspati and an additional TRQ for bakery shortening and margarine. The government has exempted the 4 per cent additional customs duty on vanaspati imports from Nepal.