Money Management

Companies cry foul over the import of cocoa powder from Asean countries and Sri Lanka

Domestic companies have complained to the Finance Ministry that some ASEAN countries, particularly Indonesia, are abusing the provisions of the Preferential Trade Agreement (PTA) to export cocoa powder to India, used in the manufacture of chocolates and other confectionery products.

Similar complaints have been filed against Sri Lanka for abusing the standards of the Free Trade Agreement (FTA) with India.

The companies want the Ministry of Finance to ask the Directorate of Tax Intelligence (DRI) to order an investigation into the matter.

Cocoa powder imports are subject to a basic customs duty of 30 per cent. However, they are exempt from duty under the PTA. To qualify for this condition, there must be 35 per cent value added in the exporting country to utilize the tariff advantages.

Companies have complained that these provisions are not respected and that ASEAN countries are abusing the agreement by importing cocoa powder from third countries and then exporting to India. “With regard to the export of cocoa powder by Indonesia, Singapore and Malaysia collectively to India under the ASEAN agreement, they do not meet the minimum value added of 35% “said a complaint to the Ministry of Finance.

For example, Indonesia added value by 25.13% in 2017-2018, by abusing the standards, according to the complaint.

Pankaj Rawal of Jindal Drugs, one of the largest cocoa powder manufacturers, said: “Southeast Asian countries such as Malaysia, Singapore and Indonesia import powder from third countries and are exporting to India without achieving the minimum value added under the PTA. products from these countries that arrive in India duty-free are 25% cheaper. »

The complaint states that the quantity of cocoa powder imports by Indonesia, at 25,124.86 tons, was significantly higher than the quantity of exports of the product by that country to India, at 10,301.20 tons. , in 2017-2018.

This, according to Abhishek Rastogi, a partner at Khaitan & Co, can only happen if imported cocoa powder is diverted via Indonesia to India. This leads to heavy revenue losses for the government, he added. The complaint pegged the total revenue loss to the Treasury at 879 million rupees in 2017-2018.

Malaysia and Singapore exported 2,500 tons and 2,000 tons respectively to India in 2017-2018. Sri Lanka exported nearly 1,200 tonnes to India that year.

Cocoa powder exports to India are not high in value but increased by 41.29% to $43.03 million in 2017-2018 from $30.45 million the previous year .

Rastogi said forfeitures of terms mentioned in preferential trade agreements were a matter of dispute. The government should not shy away from protecting domestic industry to achieve Make in India goals and should show that India is strict on agreed terms, he said.

Dear reader,

Business Standard has always endeavored to provide up-to-date information and commentary on developments that matter to you and that have wider political and economic implications for the country and the world. Your constant encouragement and feedback on how to improve our offering has only strengthened our resolve and commitment to these ideals. Even in these challenging times stemming from Covid-19, we remain committed to keeping you informed and updated with credible news, authoritative opinions and incisive commentary on relevant topical issues.
However, we have a request.

As we battle the economic impact of the pandemic, we need your support even more so that we can continue to bring you more great content. Our subscription model has received an encouraging response from many of you who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of bringing you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism we are committed to.

Support quality journalism and subscribe to Business Standard.

digital editor