In order to check the unrestrained flow of cheap vanaspati from Nepal, the Indian vanaspati industry has asked the Centre to place Nepalese vanaspati in the negative list of imports under the Indo-Nepal Trade Treaty.
The Centre should place vanaspati in the negative list of items as per annexure 'C' of the Treaty or put a clause saying that the goods that are manufactured in Nepal should contain not less than 55 per cent of Nepalese materials or Nepalese and Indian materials under the renewed Indo-Nepal Trade Treaty, Vanaspati Manufacturers Association (VMA) officials told Business Standard.
Industry sources said that Indian companies had also started sourcing their vanaspati from Nepal as it was cheaper to produce in Nepal and import into India.
"Companies like Kusum Products Ltd, Agrotech Ltd and a few others source their vanaspati from Nepal and put their brand name in India," the sources added.
The exercise for review of the Indo-Nepal Trade Treaty which is valid till December this year has already begun. After the amendment of the Indo-Nepal treaty in 1996 which withdrew the provision relating to "rules of origin" and allowed duty free imports into the country, imports of certain items such as vanaspati, zinc oxide, acrylic yarn, copper wire, steel tubes and pipes, paper products and plastics had surged.
During discussions on review of the treaty, the Centre has been contemplating imposing a 30 per cent value-addition clause on imported vegetable oil from Nepal. However, industry sources say that the 30 per cent value addition clause would not help the domestic industry.
"The Nepalese industry would still benefit from the imposition of a 30 per cent value addition clause since their product would continue to be priced lower then the Indian vanaspati," the sources said and added that even at present, Nepal can show their value addition percentage in vanaspati to be around 38 per cent.
The costs of importing edible oils such as crude palm oil and RBD palmolein into Nepal for making vanaspati, along with labour, transport and other expenses would bring their value addition to nearly 38 per cent, the sources said.
"Moreover, Nepalese vanaspati manufacturers are free to use 100 per cent imported raw materials coupled with the advantage of deletion of the minimum value-addition clause from the original terms of the Treaty. Duty-free import has made India a dumping ground for vanaspati," industry officials said.
Therefore, the 30 per cent value addition clause would serve no purpose, they added.
According to VMA, about 31,722 tonne, 65,249 tonne and 84,028 tonne of vanaspati have been exported to India from Nepal during 1997-98, 1998-99 and 1999-2000 respectively.
