China’s foray into spices extraction is giving sleepless nights to Indian suppliers

Two Indian Companies considered the opportunity and set up plants in Xinjiang and Suzhou Province, but were forced to close down the plant after a few years due to the deliberate restrictive policies by China.

Nallamothu added that the China uses the Indian operations to export semi-processed or processed products to their country by under-invoicing and paying less tax.
Nallamothu added that the China uses the Indian operations to export semi-processed or processed products to their country by under-invoicing and paying less tax.

China’s foray into the spice extraction and oleoresin industry is giving sleepless nights for the Indian value added spices industry, which once commanded a dominant position. While many industry insiders refused to comment on the subject openly, Sibi K Thomas,former vice president AVT McCormick Ingredients said that China is slowly gaining dominance in the spices extraction industry by employing restrictive trade practices against Indian companies operating in China, while operating in India by flouting several norms.

Oleoresins are a natural mixture of essential oils and resin extracted from its plant and help in adding flavour or colour to food and beverages. The first instance of restrictive trade practise by the Chinese is in the ‘Paprika oleoresin’ trade. Indian companies stepped in the 1990’s offering Indian Paprika Oleoresin, extracted using paprika grown in the Byadgi and Northern Karnataka region. The Chinese, seeing the global market potential of this product, started growing paprika in the North Western Xinjiang province.

Two Indian Companies considered the opportunity and set up plants in Xinjiang and Suzhou Province, but were forced to close down the plant after a few years due to the deliberate restrictive policies by China.

Interestingly, China opened two factories in India during the period to take advantage of the availability of high quality chilli, turmeric and pepper.Setting up a plant in India also helped in adopting the superior technology and getting semi-processed inputs for mother plants back in China.

Senior official of a extraction company which had to close their factory in China told FE that China has been flouting laws while operating in India.

“The parent company in China imports chilli oleoresin under the tariff head of paprika oleoresin instead of chilli oleoresin.Being a leading exporter of paprika oleoresin in the world, they are therefore in a position to import the said products as input for their exports and hence not pay mandatory customs duty and also avail export benefits.Secondly they also employ Chinese nationals under tourist/visit visa as against the mandatory employment and benefits,” Sriram Nallamothu of Good Earth Good Health, an NGO working in Khammam told FE.

Nallamothu added that the China uses the Indian operations to export semi-processed or processed products to their country by under-invoicing and paying less tax.
The same Chinese company has also set up a plant in Karnataka for marigold oleoresin and has been poaching the contract farmers and raw material from the supply chain in its bid to make the entire business unviable for Indian companies, he pointed out.

Thomas said that after paprika oleoresin ,China is now focusing on chilli oleoresin and curcumin in which India has an advantage due to the soil conditions.

“China has started production of Curcumin 95% also at their plant in Karnataka to export into China for blending with lesser grade turmeric imported from Cambodia and Vietnam,” he added.

Indian companies working in the extraction industry are at a disadvantage as they have several restrictions in importing raw materials used for blending and China also pays export incentives of 15-17 % as against 3 % in India, a trader told FE.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express Telegram Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.