Sri Lanka FTA gives traders oily woes
CNN-IBN | 16 April 2006
Sri Lanka FTA gives traders oily woes
New Delhi: Lalit Goel is a vanaspati trader. But all the big Indian brands that he stocks and sells don’t carry the ’Made in India’ stamp anymore. The Free Trade Agreement (FTA) with Sri Lanka is costing vanaspati-makers a fortune.
"The vanaspati comes from Sri Lanka and Nepal. India’s vanaspati does not come anymore," says a distraught Lalit.
With the Sri Lankan vanaspati flooding the Indian market, factories are shutting down, rendering hundreds of people jobless.
Over 120 vanaspati manufacturing units are in the red and manufacturers claim that it is simply not profitable to make vanaspati in India anymore.
Vanaspati is made by treating crude palm oil, which is mostly imported into India. But with an import duty over 80 percent, making it is an expensive affair.
On the other hand, palm oil can be imported into Sri Lanka at only 30 percent duty and so the vanaspati made there is much cheaper.
This comes a result of the FTA between India and Sri Lanka. The high import duty on inputs and cheap imports from Sri Lanka are killing the Indian vanaspati industry.
GM, Radha vanaspati P K Singhal, "When the goods pass through the customs, we have to pay a duty of Rs 15.50 on each unit. And the goods that are going to Sri Lanka is going for Rs 18. Their finished product or vanaspati is flowing into India duty-free."
Sources in the Commerce Ministry say India is negotiating for a limit on duty free vanaspati imports into India from Sri Lanka. Any imports over that limit will be taxed.
Union Minister of Commerce and Industry Kamal Nath assures, "Indian businessmen have established plants in Sri Lanka. They are importing the raw materials at low or no duties and then are bringing it to India free of duty, which is causing disturbance to out Indian industry. We have taken this with the Sri Lanka government."
The other step, the government could take is to allow Indian manufacturers to import crude palm oil at zero duty for their plants.
But none of this has been finalised and till that happens, India’s vanaspati industry will be an example of how free trade could potentially damage the domestic industry.
(Pallavi Ghosh and Sandeep Banerjee in New Delhi)
