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Vanaspati units seek changes in FTAs with Nepal, Lanka

Financial Express, India

Vanaspati units seek changes in FTAs with Nepal, Lanka


8 March 2005

NEW DELHI, MARCH 7: Vanaspati industry has appealed to Prime Minister Manmohan Singh to make suitable amendments in the free trade agreements (FTAs) with Nepal and Sri Lanka. The industry says that FTAs with these two countries have adversely affected the vanaspati segment.

In a memorandum submitted to the Prime Minister, Vanaspati Manufacturers’ Association of India (VMA) executive secretary S Gurumoorthi pointed out the flaws in the ‘rules of origin’ clause in the FTAs and sought necessary modifications or place vanaspati in the negative list of imports under the arrangements with the two countries in question.

The VMA memorandum said, “The rules of origin in India-Sri Lanka FTA and India-Nepal Treaty of Trade do not prescribe any compulsory minimum use of indigenous raw materials.” As a result real value addition for exports from either Nepal or Sri Lanka is not being done. The rules of origin is being deliberately misused to the advantage of exporters in these two countries. The exporting units based in Nepal and Sri Lanka import the raw material, crude palm oil (CPO) at cheaper rates and by simple process of hydrogenation, they convert it to vanaspati for exports. “This is a mockery of the stipulated rules of orgin,” the memorandum said.

It added that the influx of such cheap vanaspati from Sri Lanka and Nepal is also a mockery of FTAs which seek to restrict third country exports.

Mr Gurumoorthi said 12 vanaspati units have been set up in Nepal and 10 such units in Sri Lanka with comparatively larger production capacities. “It is ridiculous that most of these units set up in these countries are by entrepreneurs of Indian orgin. Their main intention is to export vanaspati in large quantities to India,” he said. Mr Gurumoorthi said the vanaspati units in Nepal and Sri Lanka enjoy comparative advantage. There is 100% duty concession on imports from these two countries. Though the import of vanaspati from Nepal against 100% duty concession is limited to 100,000 tonne, in actual practice such imports are much more due to porous border between the two countries. In case of FTA with Sri Lanka, there is no quantitative restrictions on import of vanaspati against zero duty, he added.

Apart from this, Mr Gurumoorthi said exporters in Nepal and Sri Lanka get 100% duty-drawback against export of vanaspati to India.