• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Harish Damodaran

The Agriculture Ministry's proposal is in response to a Commerce Ministry suggestion to reduce import duty on all spices.

New Delhi , Sept. 19

THE Agriculture Ministry has proposed the introduction of a tariff rate quota (TRQ) regime for import of pepper and cloves from Sri Lanka. Currently, import of these spices from the Island nation attracts zero duty, under the Indo-Sri Lanka Free Trade Agreement. This is as against the generally applied import duty of 70 per cent under th most favoured nation (MFN) status.

The ministry has recommended that the 100 per cent duty concession now available on pepper and cloves shipment from Sri Lanka be replaced by a 25 per cent concession, which means the preferential duty would be limited to 75 per cent of the MFN rate, thereby working out to 52.5 per cent. Further, even this lower duty would be allowed only for imports of up to 1,000 tonnes each of pepper and clove per year, with imports beyond these quantities attracting the normal MFN rate of 70 per cent.

The Agriculture Ministry's proposal is in response to a Commerce Ministry suggestion to reduce import duty on all spices. The latter feels that the existing 70 per cent duty levels are far too high and tend to encourage illegal imports and smuggling. But the Agriculture Ministry has not only opposed any general duty reduction, but it has also called for replacing the existing zero duty on pepper and clove imports from Sri Lanka with a TRQ regime.

"There is no logic for reducing the general import duty on spices from the present 70 per cent, given that this is already lower than the WTO-bound rate of 100 per cent," a top Agriculture Ministry official told Business Line. As regards imports from Sri Lanka, the official said much of this actually comprised spices of Vietnamese or Indonesian origin.

"Last year, India imported about 2,500 tonnes of clove from Sri Lanka, when the latter's own production was estimated at just 2,000 tonnes. Similarly, of the 9,000 tonnes of pepper produced by Sri Lanka, around 6,500 tonnes was exported by it. Clearly, Sri Lanka is being used as a transit point for other producers as well to dump their product here taking advantage of the free trade agreement," the official added. He claimed that the modus operandi involved the berthing of third country mother vessels in Colombo for transhipment, where the documents are changed for shipping to Indian ports.

The country annually produces about 75,000 tonnes of pepper. During 2002-03, imports amounted to nearly 17,000 tonnes, of which the major chunk was constituted by Vietnam (7,000 tonnes), Sri Lanka (6,500 tonnes) and Indonesia (1,800 tonnes). Much of the duty-free imports from Sri Lanka are routed through Chennai and Mumbai ports.

Traders say a lot of pepper consumed in centres such as Nagpur, Agra, Gwalior, Indore, Jaipur and Delhi are imported from Sri Lanka through Mumbai. While the pepper is of inferior quality, it works out much cheaper since, apart from not attracting any import duty, pepper from Sri Lanka is subjected to just a one per cent Central sales tax.

On the other hand, the pepper sourced from Kerala is subjected to a four per cent purchase tax, besides involving transportation costs to the upcountry markets.

Article E-Mail :: Comment :: Syndication

Stories in this Section
`Farm research funding worldwide down 40 pc'

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line