Govt may ask Lanka to check vanaspati exports

There may be some good news for the domestic vanaspati industry, as the central government is expected to issue a notice to Sri Lanka under the clause 8 of the free trade agreement asking it to take measures to check the unabated import of duty free vanaspati, said sources close to the development.

Around 1,08,000 tonne of vanaspati was imported from Sri Lanka and around 1,00,000 tonne from Nepal at zero duty between November 2004 and October 2005, pushing the domestic market prices down.

As a consequence local production dropped significantly. Eversince, domestic vansapati manufacturers have been demanding a curb on duty free imports as it was hitting their bottom line.

A senior official of the Indian Vanaspati Producers Association (IVPA) said that the Centre's move could save the domestic vanaspati industry. There are 16 vanaspati-manufacturing industries in Madhya Pradesh with a combined annual capacity of 48,000 tonne.

However, six have been closed down due to unfavourable conditions. Indian domestic production of vanaspati might drop by around 2-3 lakh tonne in 2006 due to the continuing closure of units and competition from imports.

After the duty on vanaspati import from Sri Lank and Nepal was cut to zero, around 80 Indian units have closed down due to falling margins, Indore based vanaspati industry sources said.

The central government had increased customs duty by 50 per cent on vanaspati imports and also extended 4 per cent countervailing duty (CVD) on all edible oil imports, including vanaspati. But the industry players say that the steps were inadequate till duty-free imports continued from Sri Lanka and Nepal on zero duty.

"Due to the low cost of palm oil in Sri Lanka and Nepal, the cost of production of vanaspati is cheaper by Rs 15,000 to Rs 16,000 per tonne. Hence they are able to sell cheap vanaspati in India," an IVPA official release said.