Vanaspati sector hit by free imports

Thriving on the duty-free status, average monthly vanaspati imports from Sri Lanka have, for the last two-three months, breached the 25,000 tonne mark.

Industry analysts expect the imports from Sri Lanka to go up further with the installation of more units in addition to the already operating 10.

The imports from Lanka and other South Asian Association for Regional Cooperation countries give a cost-competitive margin of over Rs 8,000 a tonne to the importers supported by the Foreign Trade Agreement.

The domestic vanaspati industry has been passing through a tough time competing with the mounting duty-free imports from Sri Lanka. This is in addition to 1,00,000 tonne a year already being imported from Nepal.

The vanaspati imports, which earlier used to come packed in 15-litre square tins loaded in cargo vessels, are now coming as loose hydrogenated vegetable oils in huge containers of varying sizes.

"The average monthly imports from Sri Lanka over the last 12 months were to the tune of 23,000-25,000 tonne, which were sold in the domestic markets at prices between Rs 75 and Rs 105 a tin, lower than any domestic brands," said I R Mehra, executive director and CEO, Indian Vanaspati Producers' Association.

"The cost and competitive advantage to a factory in Sri Lanka and Nepal is over Rs 17,000 and Rs 14,000 a tonne, respectively, as they import the same raw material at zero duty whereas the local industry pays 81.6 per cent as duty for buying raw material," he added.

Further, based on an inverted customs duty structure, vanaspati is imported at a substantially lower 30 per cent duty from Malaysia and Indonesia, as well.

There is a need to rationalise the import duty on vanaspati and hydrogenated fat, which is lower than what it is on its raw material. This makes the domestic industry very vulnerable to imports, Mehra pleaded.