Duty-free imports hit Vanaspati units

The domestic vanaspati industry is still feeling the heat of duty-free imports of the commodity from Sri Lanka and Nepal.

According to the figures available with the Indian Vanaspati Producers' Association (IVPA), about 36 domestic manufacturing units have shut down as a result of cheap imports from these two nations in 2006. In 2005, 17 units had shut down owing to similar reasons.

"Only 116 vanaspati units are running in the country and their capacity utilisation has declined from 30 per cent to 20 per cent in last one year," said I R Mehra, executive director of IVPA.

"We have pleaded the government to allow import of raw material (crude palm oil-CPO) at a concessional duty of 20 per cent for vanaspati units on actual user basis. Apart from giving some relief to domestic producers, it would also check cheaper imports," said Mehra.

Vanaspati producers in these two countries enjoy huge cost advantage over their Indian counterparts as they import CPO duty free, while Indian units pay a duty of 78.8 per cent. The imported vanaspati sells Rs 60-70 cheaper than the Indian price of Rs 800 (15 kg tin).

In June last year, government had decided to canalise Sri Lankan vanaspati imports through the National Agricultural Cooperative Marketing Federation (Nafed). However, after strong opposition by the Sri Lankan industry and their government's assurance of quantity monitoring, the canalisation was withdrawn in November.

According to 1998 Free Trade Agreement (FTA), Sri Lanka can export 2.5 lakh tonne duty-free vanaspati to India, while the Indo-Nepal treaty allows 1 lakh tonne of duty-free vanaspati import through the State Trading Corporation. However, in addition to this, about 1.5 lakh tonne gets smuggled from Nepal every year, said Mehra.

In a recent meeting with the union agriculture minister Sharad Pawar and with the food secretary, T Nanda Kumar, yesterday, the association has raised these issues.