‘Indian entrepreneurs in Sri Lanka flouting spirit of FTA’

Tag : Palm Olein
Agri-Biz & Commodities - Commodities
Industry & Economy - Foreign Trade
‘Indian entrepreneurs in Sri Lanka flouting spirit ofFTA’
G. Chandrashekhar
Mumbai, July 1 Some of the Free Trade Agreements (FTAs) the countryhas got into in recent years have resulted in unintended adverseconsequences, primarily because of non-application of mind at thetime of negotiations and signing of the agreement as alsolackadaisical enforcement of rules subsequently.
For instance, agreements with Nepal and Sri Lanka, as everyoneknows, opened the floodgates to import of low-priced vanaspati thathurt the domestic vanaspati industry and contributed to closure ofscores of units. No amount of representation and persuasion by theindustry moved the Government, which perhaps wanted to display abig brother attitude.
With the recent withdrawal of basic customs duty on import of crudevegetable oils of edible grade, vanaspati imports from Sri Lankaunder the FTA have all but evaporated.
Ironically, several Indian entrepreneurs had invested in Sri Lankafor production of vanaspati and successfully lobbied to keep thepolicy unchanged for more than three years. They reaped enormousprofits in the process. Flouting rules
It may also be pertinent to point out that the tiny island countrySri Lanka does not domestically produce enough raw material forproduction of 3 lakh tonnes of vanaspati. The raw material, palmoil, is imported from either Malaysia or Indonesia, duty-free. Inother words, the spirit of the FTA in terms of rules of origin andvalue addition was flouted brazenly.
Indian businessmen who find themselves jobless in Sri Lanka (afterIndia announced zero-duty crude oil import) have now opened a newgambit. They have begun to lobby that India should allow import of‘refined palmolein’ from Sri Lanka at zero-duty.
Currently, on import of refined oils, including refined palmolein,there is 7.5 per cent customs duty. Again, ironically, Sri Lankadoes not produce any palm oil, much less refined palmolein. Danger zone
The game-plan is clear. Out-of-work Indian businessmen in Sri Lankawill simply purchase refined palmolein from Malaysia and bring itover to India at zero-duty. It is not impossible to fudge documentsto show that the oil comes to India from Sri Lanka.
There is great danger if the government succumbs to pressure fromthis group of Indian businessmen operating from Sri Lanka. Mostunfortunately, some of these are known to have strong politicalaffiliations. There are whispers that this group has the tacitsupport of a high profile union minister.
If permitted, refined palmolein imports at zero-duty would directlyhurt processing units in the southern region.
Refineries operating in Tamil Nadu and Andhra Pradesh are sure toturn sick as large-scale refined oil arrivals from Sri Lanka willhave a most immediate impact on units in the south. Kerala impact
The coconut oil trade in Kerala too will be affected. Palm oilimports into the State’s ports have already been prohibited.But opening the floodgates of zero-duty is sure to depress coconutoil prices.
There is absolutely no warrant to have policies that will distortthe market and create arbitrary winners and losers. There has to bea level-playing field for all.
If need be, in order to rein-in high prices and augment supplies,the customs duty on refined oils should be reduced to zero for allcategories of importers. But to selectively favour without meritIndian businessmen in Sri Lanka would be suicidal.
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