Probe Alleged Misuse of Free Trade Agreements with Sri Lanka and Nepal for Duty-Free Import

With cheap imports of pepper from Vietnam and Indonesia threatening the domestic trade, the Directorate General of Foreign Trade (DGFT) has begun a probe into the matter. The DGFT is probing alleged misuse of free trade agreements (FTA) with Sri Lanka and Nepal for duty-free import.

According to the United Planters' Association of Southern India (Upasi), clandestine imports of pepper through the Nepal route are affecting the domestic trade. “Traders are importing pepper at cheaper rates from Vietnam and Indonesia via Sri Lanka and dumping it in the domestic market at higher prevailing rates.

Importers are using the FTA with Sri Lanka and getting pepper duty-free. They are also importing for value addition and re-exports. But, instead of re-exporting it, they are selling in the domestic market,” Vijayan Rajes, president, Upasi, told Business Standard.

He said the ministry of commerce, based on a complaint from Upasi, has directed the DGFT to probe how FTAs with Sri Lanka and Nepal are being violated.

“We do not have any estimate on the clandestine imports. But, we understand from the trade sources that people are misusing the FTA with Sri Lanka and Nepal. There is no duty on imports from Sri Lanka and the traders are using this route. We had filed a complaint with the ministry of commerce and they have ordered a probe,” Rajes said.

He said many traders in Nepal are importing pepper through the nearby port in Kolkata. Instead of taking the consignment to Nepal via the road route, they are terminating them inside the Indian market, which is affecting  these domestic producers.

Currently, pepper is traded at Rs 735 a kg in the Indian market, while the traders are getting it at Rs 620-630 per kg from Vietnam. In 2013-14, India imported 15,680 tonnes of pepper valued at Rs 616 crore. This year, exports are likely to increase 20-25 per cent, he said.

The domestic production of pepper declined 18.2 per cent to 45,000 tonnes in 2013-14 compared to 55,000 tonnes in the previous year. This year, however, the production is estimated to go up 33 per cent to 60,000 tonnes, due to bumper crop in Karnataka. The production in Kerala, the traditional producer, is likely to decline due to heavy monsoon damaging the crop earlier this year.

Prices in the domestic market have gone up 45.5 per cent to Rs 735 per kg in mid-November this year from Rs 505 per kg in the same month last year. During 2014, the world pepper production is provisionally expected to reach 4,04,000 tonnes.

Vietnam is expected to produce 1,50,000 tonnes to retain top position followed by Indonesia with 60,000 tonnes.