Sri Lanka’s vanaspathi exports to India plummet
Sri Lanka’s vanaspathi export industry (fully or partially hydrogenated vegetable cooking oil) established to cater to the needs of India under the Free Trade Agreement has been adversely affected following the ban imposed on crude palm oil (HS Code1511.10) by the government.
Thirteen companies engaged in the production of vanaspathi using palm oil for the Indian market are on the verge of collapsing, several leading members of the Vanaspathi Exporters Association told the Business Times.
The palm oil containers imported to the island on April 7 for reshipment to India after processing it in local factories, along with relevant shipment, were held up without clearance at the Colombo port since April 7 the day after the import ban they complained.
The importers had to pay large sums of money as demurrage and customs surcharges due to the delay in clearance of containers without their fault; they said adding that there has been no production of vanaspathi for the past two months.
The 13 factories with around 5000 workers are set to close down operations as it has to cancel all forward import contracts with palm oil suppliers.
These companies have also been compelled to cancel sales agreements with Indian importers as they cannot supply the required quantities of vanaspathi due to a stoppage in production as a result of the ban.
It was unimaginable, that Prime Minister Mahinda Rajapaksa who promoted the reshipment of very same palm oil after processing it locally as vanaspathi to India when he held the presidency has issued the gazette notification to ban it on April 6, they added.
The 13 factories with refineries (10 owned by Indians and three by local investors) were set up with BOI facilities during the period of 2008/2009 under the Indo –Lanka FTA signed by former President Chandrika Kumaratunge in 2002.
The local vanaspathi industry came into being as a result of FTA which has allowed Sri Lanka to export 250,000 tonnes duty-free vanaspati to India per annum with its value at around US$32 million.
The daily reshipment volume is around 40 containers and the company profit share was $150 per tonne, an exporter said.
According to industry sources, the formal local manufacturing industry is worth Rs. 85 billion and with the SMEs, the sector’s value is around Rs. 95 to Rs. 100 billion.