Vietnam Pepper Entering India In The Garb Of Being Lankan Origin With Inflated Invoices, Complain Growers

Indian growers are complaining that they are hurt by imports of pepper into the country under the SAFTA (South Asian Free Trade Area) and duty-free under ISFTA (Indo-Sri Lanka Free Trade Agreement) from Sri Lanka, besides Nepal.

More importantly, growers allege that Vietnam pepper enters India cheaply in the garb of being produced in Sri Lanka or Nepal.

The Centre has taken a slew of measures such as fixing a minimum import price of Rs 500 a kg cost, insurance and freight but the problem continues to haunt growers.

One of the main issues against the imports is that growers suspect that the invoice is showing a price higher than what the consignments are contracted at, raising concerns that pepper imports are paving way for hawala trade.

Under SAFTA, India levies zero duty on the import of pepper from Sri Lanka, with a cap of 2,500 tonnes. Anything above that is charged eight per cent duty.

Under ISFTA, too, imports are permitted at eight per cent Customs duty. The source of origin for the pepper has, mandatorily, to be Sri Lanka.

In addition, pepper is also allowed to be imported at 51 per cent Customs duty under an agreement with the Association of South-East Asian Nations (ASEAN) from January 1 2019 against 70 per cent previously.

These pepper imports are permitted only if the minimum import price (MIP) of consignment is Rs 500 a kg.

Pepper imports are also allowed below Rs 500 a kg under advance authorisation scheme for 100 per cent export-oriented units and those functioning in special economic zones to meet the needs of the oleoresin industry.

Despite all these, pepper from Vietnam gets imported as having originated from Sri Lanka. Besides, imports from Nepal, too, are hurting growers.

“Pepper is imported into India through FTAs that have been signed bilaterally as well as pacts such as the South Asian Free Trade Agreement (SAFTA),” said R Sanjith Nair, Secretary, United Planters of Southern India (UPASI).

“Imports of pepper, legal and illegal, into our country are hurting us badly. There are problems with the origin of pepper with legal imports,” said Bose Mandanna, former Coffee Board vice-chairman and a coffee estate owner in Kodagu, Karnataka.

Pepper is grown as an intercrop with coffee that helps planters meet rising costs.

Vietnam pepper is bought by traders, including from India, and is then dumped into India at a lower duty, taking advantage of the FTAs and other trade agreements.

For example, Nepal had been importing only 48 tonnes of pepper from Vietnam until a few years ago. Currently, it imports over 5,000 tonnes, says UPASI’s Nair.

According to trade sources, this clearly indicates that black pepper originating from Vietnam is finding its way into the Indian market.

On the other hand, pepper imports from Sri Lanka increased last year to 22,071 tonnes from 21,518 tonnes the previous year, up 2.5 per cent.

Kishor Shamji, Indian Pepper and Spice Traders, Growers, Planters Consortium (IPSTGPC) Coordinator, said that the use of imported pepper in the domestic market increased 30 per cent last year compared with 2019.

Pepper imports under SAFTA and ISFTA increased to 4,019 tonnes from 3,114 tonnes, though all were shipped into the country at the Rs 500 a kg MIP.

Overall, pepper imports from Sri Lanka increased 2.5 per cent last year to 22,071 tonnes from 21,518 tonnes the previous year, Shamji said.

“It is surprising that pepper imports continue to be higher during the novel coronavirus (COVID-19) pandemic when the trade was reportedly hit. The shipments have increased despite problems at ports and container shortage. That is disconcerting,” said Mandanna.

“In December 2020 alone, 822 tonnes of pepper were imported against 80 tonnes in December 2019. It is a 100 per cent rise and worrisome,” said Shamji.

“We have raised the issue with various government authorities and have tightened imports. Still, importers seem to be finding loopholes to bring Vietnam pepper,” said K Vishwanath, Consortium of Pepper Growers Organisations (CPGO) Coordinator.

Representatives of growers’ organisations such as the United Planters Association of Southern India, Central Arecanut and Cocoa Marketing and Processing Co-operative Limited (CAMPCO) and Karnataka Planters Association make up the consortium.

Traders and growers argue that imported pepper is cheaper than the Rs 500 a kg MIP since it is sold at Rs 300 in the domestic market.

Pradeep Poovaiah, CPGO technical officer, said: “The landed cost of imported pepper after paying eight per cent duty is Rs 540 a kg. If the imported consignment is sold at Rs 300 a kg, it raises a serious question. Are invoices being manipulated to show a higher price?”

According to Shamji, money laundering and hawala channels are being injected with the excess money that is quoted in the invoices of pepper imports.

IPSTGPC and CGPO allege that the Foreign Exchange Management Act is being violated through these imports.

“Pepper imports totally cost Rs 208 crore at Rs 500 a kg from Sri Lanka. But the island nation has contracted to sell it to other destinations at $3,500 a tonne. If that is taken into account for the Indian shipments, then total imports work out to Rs 104 crore. This clearly indicates that the invoices are being inflated to show higher price,” Shamji said.

The problem with these imports is that they are actually Vietnam pepper brought into the country under the garb of Sri Lankan pepper.

“Vietnam pepper is coming into India with fake certificates of origin from Sri Lanka. There is no change in the harmonised system of nomenclature (HSN) code which classifies goods from any source when they are shipped to India from Colombo after landing there from Hanoi,” said Vishwanath.

A change in HSN is required to show that value-addition has been done to a product. Pepper imports from Sri Lanka will qualify for concessions under SAFTA and ISFTA only if they have the certificate of origin.

Poovaiah said unscrupulous traders take advantage of the authorities in Colombo issuing certificates of origin without proper verification to produce fake ones.

In fact, following complaints from India, Sri Lanka has stopped imports of the spice from Vietnam. Despite that, the consignments continue to arrive at various ports across the country.

“Importers are producing fake bills of landing as if the pepper left Sri Lankan ports when they would have actually originated from Vietnam,” said Poovaiah.

Such imports can be tackled if authorities ensure that the pepper brought into the country strictly adheres to the six per cent piperine content, according to Vishwanath.

The oleoresin industry, which imports pepper at zero duty, argues that Indian pepper’s oil content is lower and hence it is not suitable for the sector. The problem arises since Indian growers harvest pepper after the berries mature.

Sri Lankan and Vietnam growers harvest berries before maturing which helps in getting the required oil content.

But Shamji contests the view saying Indian pepper has a higher oil content of over six per cent and is suitable for the oleoresin industry.

Growers argue that the Vietnamese pepper oil cent is lower than five per cent.

IPSTGPC and CGPO are surprised over imported pepper meeting the specifications such as oil and piperine in laboratory tests.

According to them, a private party draws the sample of imported pepper and sends it to the Spices Board. They suspect some manipulation during the period the samples are transported.

CGPO sources said that government officials complain of lack of manpower to check the imports.

Poovaiah said increasing manpower and ensuring coordination of customs, ED and Department of Revenue Intelligence can help overcome the problem.