Vanaspati makers reeling under Sri Lankan imports

Duty-free vanaspati imports from Sri Lanka are flooding the local market and the domestic vanaspati industry is at the receiving end of an an unfair competition Because of the free trade agreement (FTA) with that country, Indian players allege.

"Imports from Sri Lanka are likely to be around 3 lakh tonne in the current financial year. Last year there was no import at all. The imported products are cheaper due to the duty-free status they enjoy," said an industry member.

The domestic sector is crying foul as the raw material for hydrogenated oils "� crude palm oil "� is imported at a duty of 81.6 per cent from Malaysia compared with the duty-free imports of the finished products from Sri Lanka and Nepal.

The sector is also facing a risk of rising finished product imports from Malaysia, as the import duty on them is just 30 per cent.

"These factors make domestic vanaspati expensive in comparison," said Kuldeep Goyal, general manager (commodities) from Rajpura-based Amrit Banaspati Co Ltd.

Domestic industry has about 260 vanaspati units (with an annual installed capacity of 50.05 lakh tonne in terms of oil) out of which 120 units (having annual installed capacity of about 18.4 lakh tonne) have either closed down or became dysfunctional.

Over the last few years, the market growth in this sector has stagnated following availability of other cheaper imported oils. Industry estimates vanaspati's domestic market size to be about 12 lakh tonne.

The annual production of 7 lakh tonne versus an installed capacity of 50.05 lakh tonne is a matter of concern for the survival of sector.

Earlier, domestic manufacturers faced a similar situation from Nepal and the Union government had put a cap of 1 lakh tonne on imports from the Himalayan kingdom.

"A similar initiative is required else the industry will be hit adversely," said Gyan Chordia, vice president (finance), with Liberty Oil Mills Ltd.

The industry members have sought vanaspati to be put in the negative items list in the FTA to safeguard the sector.

The domestic manufacturers also face competition from the Indian units set up in Sri Lanka. Various Indian manufacturers which have set up units in the southern nation enjoy double benefit of duty free imports and also Sri Lankan licensing condition that the entire production should be exported to India.