The Hindu Business Line : Arecanut being smuggled through Nepal, say traders

Smuggling of arecanut is allegedly rampant along the country's borders with Nepal to cover a shortfall in supply of an estimated one lakh tonnes annually. This is depriving the nation of substantial revenue by way of import duty.

Annual consumption of areca (betel) nuts of all varieties is estimated at five lakh tonnes (lt) and against this, the national production is projected at four lt leaving a shortage of around one lt. This shortfall in supply is met by imports by traders and manufacturers, trading sources in Karanataka told Business Line.According to the Mangalore-based Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd (Campco), total area under arecanut cultivation is 2,64,000 hectares and the annual production is estimated at 3.13 lt. discrimination

Now, the imports have taken a different and rather dubious route, trading sources and some of the growers in Karnataka alleged. It is "currently met by alleged smuggling via Nepal and business has fallen into the hands of a few smugglers, carriers, transporters who are active at Indo-Nepal borders, be it Panitanki-Kakarbita in West Bengal or Jogbani in Bihar". This kind of business results in a "total revenue loss to the Union Government to the tune of anything not less than Rs 250 crore in a year", they claimed.The import duty on arecanut which is 100 per cent basic plus 4 per cent special additional duty, and thus, the total comes to 108 per cent. The import duty on other items such as of food, fruit, nut, spices, and so on is much lower than this. Thus, there is discrimination as far as arecanut is concerned, they added.

Normal rate of import duty for spices and other edible nuts is between 20 per cent and 35 per cent, whereas in some cases such as dried fruits it is on kg basis depending on price of the item. It is one of the major factors, which encourages illegal trade, they said.

Added to this, DGFT in its latest notification no. 15 (re-2008) dated June 6,2008, imposed a critical policy condition of import price which has to be minimum Rs 35 a kg for eligibility to import freely. It has turned out to be a fatal blow to the people engaged in genuine and legal import of arecanut.

In such a scenario either they have to do over invoicing if the price of betelnut in international market is lower than Rs 35 a kg or abstain from importing, "most of them have chosen the second option and it is evident if we look at the statistics of betelnut import into India," they said. This "artificial price fixation by virtue of impugned notification of the DGFT, has been set aside and quashed by the Madurai bench of the Chennai High Court", notwithstanding, it is not followed by most of the custom houses in India, they claimed.

Nepal has strategically kept a low import duty on betelnut just to encourage their trade and they are earning considerable revenue on it also. Betelnuts from Indonesia when imported into Nepal import tax amounts equal to Rs 9.50 a kg, which includes import duty plus other taxes of Nepal. Since Nepal is a land locked country all its imports are through Calcutta port where almost 300-400 containers (18 tonnes each) of betelnuts arrive every month for transit to Nepal.

All goods are imported to pump into the Indian market through carriers. These are a class of people located in both the countries "they do all the settings with customs, police and other forces", they alleged. An Indian trader, if imports at any port in India, has to pay import duty of Rs 38 a kg, whereas if he buys from Nepal through these carriers his cost will be Rs 15 a kg less. These are the dynamics of this trade, they added.

Govt intervention

The trade is of the view that the Union Government must take necessary action in this matter. Further, to eliminate the root cause, it should reduce the import duty or rather change it to kg-duty basis such as basic duty of Rs 20 a kg gram for general countries; basic duty of Rs 8 a kg gram for SAARC countries and basic duty "nil" for Sri Lanka, they added.

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