Notice to Sri Lanka on surge in vanaspati imports

There appears to be trouble brewing over imports with Sri Lanka. After canalising imports of vanaspati through Nafed, New Delhi is issuing a prior consultation notice to the island nation ahead of invoking safeguards to check the surge in vanaspati imports.

"We have decided to issue a prior consultation notice and are consulting the law ministry on this," an official of the commerce ministry said.

Article 8 of the India-Sri Lanka Free Trade Agreement states that, "if any product, which is the subject of the preferential treatment, is imported... in a manner or in such quantities as to cause or threaten to cause serious injury in the importing contracting party, the importing contracting party may, with prior consultations except in critical circumstances, suspend provisionally without discrimination the preferential treatment accorded under the agreement."

Vanaspati imports from Sri Lanka have been cause for concern for the domestic industry as such imports accounted for nearly 34 per cent of the total imports from the country during 2004-05.

According to data available with the commerce ministry, the monthly average of imports of vanaspati from Sri Lanka has increased to around 170,500,000 kg during 2005 compared with just 10,500,000 kg in 2004.

Officials said the decision to issue a notice was taken following Sri Lanka's response that it was willing to undertake a voluntary export restraint of up to 2.5 lakh million tonnes. It has, however, clearly stated that this would not include bakery shortening and margarine.

New Delhi has been insisting on a voluntary export restraint of 2.5 lakh million tonnes and inclusion of both bakery shortening and margarine within the limit. The matter has assumed serious proportions on account of closure of domestic units.

"There were around 256 vanaspati units in the country of which 112 units have been either closed or are not functioning," an official said.