Indian delegation due here to resolve Vanaspati exports issue

by Surekha Galagoda

A delegation led by Director General Foreign Trade India Dr. K. T. Chacko will be in Sri Lanka to meet his counterparts at the commerce ministry and BOI to decide on the modality to export Vanaspati and bakery shortening products to India.

The six-member delegation will hold talks for two days with their counterparts in Sri Lanka. Under the modalities they will discuss how to export, how to clear, how to check quantities of Vanaspati and bakery shortening products and the authorised agency in India who is able to check and verify the products.

Director General Commerce Manel Silva said "we want the best for our manufacturers and are hopeful of arriving at a final decision soon." According to sources a final decision on the export of Vanaspati and bakery shortening products will be taken at this meeting.

Earlier Vanaspati manufacturers were free to export any quantity they wanted but now Sri Lankan manufacturers can export only 250,000 MT per annum after the quota was agreed upon by Sri Lankan and Indian authorities.

According to the sudden introduction of the gazette notification unilaterally by India on June 31, this year under 17/2006/2004-09 by the Deputy General of Commerce Ministry India, all exports of Vanaspati should be canalised and imported through NAFED.

This sudden decision has resulted in exports coming to an immediate halt and the closure of fourteen factories making 6,500 people jobless overnight. The other repurcussions include the owners not being in a position to pay bank debts, utility bills and salaries of employees.

The 10-Member Companies having invested US$ 100 million are unable to meet the Financial Commitments to the Banks against the loans and Trust Receipts and there is a danger of being treated as defaulting customers, as well as to meet the fixed costs such as salaries.

Two-hundred containers in transit as at June 4, are held up in various Indian Ports incurring heavy container detention charges and demurrage without any positive steps being taken by the relevant authorities.

Further a total of 12,000 MT of finished products manufactured are held up in the factories with the possibility of deterioration of quality and 50,000 MT of Crude Vegetable Oil (CPO) are idling in storage tanks from the first week of June 2006.

Ten Vanaspati Manufacturing factories as well as four Bakery Shortening factories were closed from June 4 and 3,000 direct employees and 3,500 indirect workers lost their jobs.

The inflow of US$ 700,000 per day amounting to 47% of total foreign exchange earnings from exports under the Indo Sri Lanka Free Trade Agreement had stopped from the first week of June. The Vanaspati Association is concerned about the situation as it has already extended beyond 85 days without a solution in sight.

The seasonal high demand for Vanaspati is usually from September to November and there is a balance of 110,000 MT of Vanaspati to be exported under the Bilateral Agreement for 2006, but the members of the Vanaspati Association feel that there is a possibility of loosing the export of the balance 110,000 MT of Vanaspati during the high demand season as well as for the year 2006 unless an acceptable solution is arrived at within this month.

On the instructions of President Mahinda Rajapaksa and the intervention of Minister Jeyaraj Fernandopulle a team of officials consisting of Commerce Secretary, BOI Chairman and Commerce Ministry officials along with Sri Lanka's High Commissioner in Delhi met the Indian Commerce Ministry Secretary Menon, Director General Foreign Trade, Dr. K.T. Charko on August 2, and discussed ways and means of finding an acceptable solution but there is no indication of any positive solution being found in the near future.