For Sri Lanka to get more revenue from the export of Spices and Allied Products, there is a dire need to increase production and also productivity, according to a veteran in the trade.
Ghulam Chatoor, running one of the top spices’ trade firms in the country, says marketing the produce in the international markets is no problem. “The high prices being fetched by these commodities should make increased production a profitable exercise to the growers,” he said in an overview of the market for these high-priced commodities.
In a statement he said: “The India Sri Lanka Free Trade Agreement (ISFTA) that became operative between Sri Lanka and India from March 2000 gave plenty of meaningful concessions to spice exports from Sri Lanka to India. On 1st March 2003 India introduced a zero percent tariff on exports of spices from Sri Lanka to India resulting in over 80% of our Cloves, Pepper and Nutmegs exports ending up in India during the last few years. Especially in the case of Cloves, whereas other origins have been paying around 40% tariff for imports of Cloves into India, Sri Lanka has enjoyed a 0% tariff into India, since 2003.
India’s annual imports of Cloves from all origins have been around 10 to 12000 tonnes. Sri Lanka exports have averaged annually 4000 tonnes. She has been obtaining supplies from Tanzania and Madagascar to fulfill her balance requirements.
ISFTA has been an obvious advantage to Sri Lanka as we earned more foreign exchange than what would have been received by our African competitors. Because of this duty concession, Sri Lanka has obtained prices higher than Africa. This premium in price has gone up, sometimes to US$ 2,500 per tonne.
However, India has, in keeping with a policy of supporting Least Developed Countries, reduced tariffs on imports from Africa. Since October 2010, the import tariff which stood at over 30% for Cloves imported from Africa has been reduced to 17%. Next year will see further reductions in this tariff, hence, the advantage that Sri Lanka has enjoyed hitherto will be completely eroded in a couple of years.
At present Sri Lanka obtains a premium of hardly 5% over Africa whereas a few years back the premium enjoyed by Sri Lanka was 30 to 40%. Such was the advantage Sri Lanka enjoyed from 2003 to 2010.
Meanwhile the export of Cinnamon has continued at a steady pace.
Two recent developments, first the bifurcation from Cassia and a distinctive HS Code number for ‘true cinnamon’ granted by the World Customs Organization and second the launching of Ceylon Cinnamon Lion Logo would help the industry. However the fear is that if the difference in prices between our Pure Cinnamon and Cassia widens, then the tendency for the consumers to switch to Cassia would intensify.
Several plantations in Sri Lanka have also, lately, resorting to Cinnamon production.
As far as Pepper is concerned, global exports have been on an average around 250,000 tonnes. Average exports from Sri Lanka have been around 6000/7000 tonnes. There is considerable scope to increase our exports if our production can be increased.
Recently published low global Pepper production figures indicate that high prices will continue to prevail.