Sri Lanka set to cap vanaspati exports

The government has managed to convince Sri Lanka to limit exports of vanaspati oil to India at 2.50 lakh tonne per annum, a move that is expected to limit the damage to local industry from duty-free imports.

"Under India-Sri Lanka Free Trade Agreement it has been decided to limit the exports of vanaspati to India at 2,50,000 tonne per annum. This takes care of all the capacity that has been created in that country and give comfort to investors," Commerce Secretary G K Pillai said at a CII conference.

With this decision, India is likely to take back the order making it mandatory to route imports through the National Agricultural Cooperative Marketing Federation, official sources said.

Ever since the order was issued in June, imports of edible oil into India from Sri Lanka has come to a standstill. Imports of vanaspati into India had soared because of the cost difference after the two countries entered into an FTA.

Sri Lanka does not impose duty on palm oil from which vanaspati is made, while in India the duties are as high as 80 per cent. This puts Sri Lanka at an advantage, which lured many Indian producers to set up units there.

Earlier, in his address, Pillai said the industry would have to brace for trade pacts without waiting for reforms in the domestic arena that would help them deal with agreements.

"FTAs will drive domestic reform. Industry will be pushed and will also drive changes," he added.

To examine the issue of inverted duty structure coming into place because of FTAs, a committee headed by Planning Commission member Anwarul Huda would submit its report in the next seven days to the Prime Minister, he said.

"The report will enable a systematic structure to deal with the issue," he added.

Pillai said negotiations on India-EU agreement on trade and investment would begin in March next year and completed in next two years.

"We need minute studies on the impact the agreement will have on the industry. The ministry is willing to put in money," he added.