Vanaspati firms see red in import flood

The domestic vanaspati industry is on the verge of collapse because of the duty free import of vanaspati, margarine and bakery shortening from Nepal, Sri Lanka and Bhutan under the free trade agreements.

Of the total 268 installed vanaspati plants, 148 have already closed down and the rest are finding it difficult to survive. The capacity utilisation in the industry has dropped to barely 20 per cent.

These facts have been brought to the notice of the government in a pre-budget memorandum submitted by the Indian Vanaspati Producers' Association (IVPA).

It has pointed out that while the import of vanaspati is allowed at zero duty, the raw material for the production of local vanaspati and crude palm oil is subjected to 78.2 per cent duty.

The vanaspati manufacturers in Nepal enjoyed another cost advantage as they are allowed to import crude palm oil without any import duty. The duty on this raw material in Sri Lanka is only $ 25 per tonne.

As a result, the cost of vanaspati produced in India turns out to be about Rs 13000 a tonne higher than that in the neighbouring countries. The vanaspati manufacturers of these countries can sell their produce in India at prices about Rs 4000 a tonne lower than those of the leading Indian brands, the memorandum has pointed out.

"This disparity in the cost of manufacture results in patently unfair competition", the IVPA has said.

It has urged the government to correct the current inverted duty structure which allowed the finished product to be imported at zero duty while the raw material carried 78.2 per cent duty. The import duty on crude palm oil should be lowered to 20 per cent for the vanaspati industry on actual user basis.

Besides, the IVPA has suggested that vanaspati imports from Nepal should also be canalised in the same matter as is applicable on the product from Sri Lanka.

It also wants that vanaspati, margarine and bakery shortening should be put in the negative list in all future bilateral and regional trade agreements.