Pepper minimum import price will lead to closure of export units, says AISEF
KOCHI: The recent government notification imposing Rs 500 per kg minimum import price on black pepper will create negative perception for the Make in India initiative and would impact all investments in setting up of import-re-export businesses in future, unless it is reversed, said All India Spices Exporters Forum (AISEF).
ReDescribing it as a death blow to 100% EOUs and SEZs, Prakash Namboodiri, AISEF chairman said the notification practically bans the entry of pepper in all forms from outside and anyone procuring pepper at global market price will face penalty at 70 per cent duty on differential price and surcharge.
Some of the 100% EOU and advance licence holders whose shipment has hit the Indian shores since last two weeks have been slapped with notices of Rs 2.5 to 2.7 lakh penalty for not providing Rs 500 as per the new notification, he said.
Manufacturing in India with the higher import rates fixed by the country would lead to the closure of export units. The export units have entered into various international supply contracts for private retail labels and bulk supply packs. At stake is the reputation of Indian importers and exporters as the contracts cannot be revised and the terms cannot be breached.
Also, most of the contracts are for mixed spices like pepper, chillies, ginger, turmeric, etc in assorted lots. Without pepper in the portfolio, the export of other items would also be severely hit. Oleoresin companies and other value added processors will not be competitive to sell their products in the international market, if they import pepper at such a high price and may incur additional loss by paying composition fee for export obligation value shortfall.
The government has fixed minimum import price of all forms of pepper at Rs 500 per kg or $7875 per tonne when today global market prices are trading at $3500-3600 per tonne. This means that the government is expecting all 100% export units to use India pepper at Rs. 500 per kg ($7875/tonne) which is about $4375 /tonne above the world parity levels, he observed.
High pepper prices since 2006 had prompted farmers all over the globe to increase the production. The Indian consumption of 60,000 tonnes per annum is keeping the Indian prices way far higher than other producing countries where the local consumption is only 5000-8000 tonnes annually.