Pepper prices record sharp drop as harvest season arrives

• Indian importers await clearance from their govt. to import duty free pepper 

Sri Lanka’s pepper prices have sharply dropped from US$ 4,000 to US$ 3,000 per tonne with the beginning of the harvest season despite the ban on pepper imports into the country.

India-based Hindu Business Line reported that a sharp decline in pepper prices in Sri Lanka has prompted Indian pepper importers to approach Director General of Foreign Trade (DGFT) to issue licences for their pending applications to import pepper from Sri Lanka under the Indo-Sri Lanka FTA which allows duty free with MIP (minimum import 
price) conditions. 

The Sri Lankan government in December prohibited direct re-export and import of spices, including pepper for re-export purposes, after minor processing, under the Commercial Hub Regulations in the Finance Act.

The move was in particular targeted at curbing the pepper re-export racket, which imported low quality pepper from countries such as Vietnam to re-export to Indian by mixing with locally grown pepper under Indo-Sri Lanka FTA and the South Asia Free Trade Area.

Under the South Asia Free Trade Area, imports up to 2,500 tonnes from Sri Lanka are duty free, while 8 percent duty is levied, if imports are above the prescribed limit.

Meanwhile, pepper prices in Vietnam have moved up to US$ 2,300 from US$ 2,000.

Sri Lanka’s pepper exports to India have recorded a marked decline as both countries moved to impose import controls. 

India remains Sri Lanka’s largest pepper export market. However, the pepper re-export racket has adversely impacted Sri Lanka’s pepper exports to India while also damaging the reputation of the country’s domestically grown pepper, which is regarded to be of high quality.