The heavily export-dependent jute mill industry in Nepal wants India to withdraw the recently imposed countervailing duty (CVD) of 12.5% on sacking bags and hessian cloth imports. Both the country’s Foreign Trade Association and Nepal Jute Mills Association (NJMA) say the duty goes against the spirit of long-standing understanding that New Delhi will treat the industry of the two countries on equal footing. Moreover, the CVD goes against the spirit of South Asian Free Trade Area agreement, they argue.

Nepal mill officials maintain that while the giant Indian industry in recent years had produced more than 1.6 million tonnes (mt) of jute goods, mainly sacking bags and hessian cloth, their output is facing an inexorable decline as the only significant outlet for its products remains India. That now also has come under threat.

Kathmandu finds it puzzling that while India’s Directorate General of Anti-dumping & Allied Duties (DGAD) has recommended anti-dumping duty at varying rates on jute goods originating in Bangladesh and Nepal, the latter has been singled out for CVD. DGAD carried out the investigation on the basis of a representation by Indian Jute Mills Association that government subsidies such as Dhaka’s 10 per cent cash support to exporting mills are enabling them to sell jute products here at rates lower than in their own markets.

But unlike NJMA, Dhaka Chamber of Commerce and Industry (DCCI) was quick on its feet to move the country’s “commerce ministry, tariff commission and concerned government agencies to immediately take up with New Delhi for a review of the technical process of Indian anti-dumping investigation”.

According to industry officials here, New Delhi is not following up on the DGAD recommendation because the political fallout of the duty will not be pleasant, especially when an agreement on sharing of Teesta river waters remains elusive.

The Bangladeshi industry says India is the destination for 20% of its annual jute goods exports of around $900 million. DCCI argues that “this 20% of total jute goods exports by Bangladesh claims a share of only eight% of the Indian market”. But in the event the proposed anti-dumping duty derails exports to India, it will leave an “adverse impact on growers, jute mills and exporting community. Moreover, Bangladesh’s trade imbalance with India will be further aggravated,” DCCI says.

If this is what Bangladesh fears will befall its jute economy in case India goes ahead with its import restrictions, then the predicament of the industry in Nepal — which claims to sell “95% of its jute goods output” to its southern neighbour — because of the CVD is easily understandable. According to NJMA, exports to India have virtually stopped following the imposition of CVD in mid-December. Prior to that, about 15 truckloads of jute goods would come to India from Nepal every day.

The Nepalese industry shrunk over the years to about half a dozen mills has either stopped production or is operating at very low capacity. For smooth functioning of what remains of the industry, NJMA wants the revocation of CVD by New Delhi.

In the meantime, following the withdrawal of subsidies relevant to raw jute cultivation by Kathmandu, the country’s land under the crop is down to 11,000 hectares from a high of 56,000 hectares three decades ago. As a result, Nepal has become highly import-dependent for raw jute.

Source: Business Standard