DGFT initiates probe into FTA violations in pepper trade

The Director General of Foreign Trade is looking into allegations that trade agreements with Sri Lanka and Nepal are being misused to dump cheap pepper in the Indian market

The Director General of Foreign Trade (DGFT) has initiated an investigation into cheap imports of pepper from Vietnam and Indonesia that are reportedly threatening the domestic trade. The regulator is probing the alleged misuse of free trade agreements (FTAs) with Sri Lanka and Nepal for duty-free import of pepper. 

 

The United Planters' Association of Southern India (Upasi) has alleged that clandestine imports of pepper through Nepal are affecting domestic trade. 

 

“Traders are importing pepper at cheaper rates from Vietnam and Indonesia via Sri Lanka and dumping it in the domestic market at higher prevailing rates,” Vijayan Rajes, President, Upasi told Business Standard. “The importers are using the FTA with Sri Lanka and getting pepper duty free. They are also importing for value addition and re-exports but instead of re-exporting it, they are selling in the domestic market.” 

 

Pepper is currently traded at Rs 735 per kg in the Indian market – an annual increase of 45.5% -- while traders are getting it at Rs 620-630 per kg from Vietnam. In 2013-14, India imported 15,680 tonnes of pepper valued at Rs 616 crore. This year, exports are expected to increase 20-25%, Rajes said. 

 

He added that the ministry of commerce, based on a complaint from Upasi, has asked the DGFT to probe how FTAs with the two neighbouring countries are being violated. 

 

“We do not have any estimate on the clandestine imports but we understand from trade sources that people are misusing the FTA with Sri Lanka and Nepal,” he said. 

 

He claimed that a number of traders in Nepal are importing pepper through the Kolkata port. Instead of taking the consignment to Nepal via the road route, they are terminating the stocks in the Indian market, which is affecting domestic producers. 

 

Domestic production of pepper declined 18.2% to 45,000 tonnes in 2013-14 compared to 55,000 tonnes in the previous year. This year, however, the production is estimated to go up 33% to 60,000 tonnes due to bumper crop in Karnataka. The production in Kerala, the traditional leader in production, is likely to decline due to heavy monsoon rains damaging the crop earlier this year. 

 

During 2014, world pepper production is provisionally expected to reach 404,000 tonnes. Vietnam is expected to produce 150,000 tonnes to retain the top position, followed by Indonesia with 60,000 tonnes.