Talks soon to resolve vanaspathi issue

by Lalin Fernandopulle

[email protected]

The government will commence negotiations with the Indian authorities to resolve the crisis affecting Sri Lankan manufacturers of vanaspathi (Hydrogenated vegetable oil) following the abolition of the Indian import tariff on crude palm oil, BOI sources said.

Sri Lankan exporters of vanaspathi are undergoing losses due to the decision taken by the Indian authorities to withdraw the import duty on crude palm oil to pave the way for cheaper products to enter the Indian market.

The BOI said investors of vanaspathi have been badly affected due the imposition of the new import regulation which has adversely hit the industry. The Indian government has imposed a quota free system for vanaspathi imports resulting in huge losses to manufacturers.

Local vanaspathi exports were done under the Indo-Lanka Free Trade Agreement with an investment of US$ 100 million.Over 20 Sri Lankan companies export vanaspathi ghee, bakery shortening and margarine to India. Around 4,000 people are directly employed in the industry.

"The gradual reduction of customs duty for the import of crude palm oil from 45 per cent in April to 20 per cent in March resulted in manufacturers losing the competitive edge over exporters to India", a spokesman for the Department of Commerce said.

The price of crude palm oil increased from US$ 770 per metric ton in 2007 to US$ 1,220 per metric ton this year.Crude palm oil is used as a raw material to manufacture vanaspathi.

The total vanaspathi exports to India from April 1, 2007 to March 31, 2008 are 160,000 mt.