India May Levy 20% Export Duty on Guar Gum

The Directorate General of Foreign Trade (DGFT) is considering levy of 20 per cent export duty on guar gum, a derivative of guar seed, with application in oil drilling, paper, textiles, mining, explosives, ore floatation and many other industries.

"We have received representations from a section of exporters to levy a minimum 20 per cent export duty, after withdrawing the six per cent subsidy currently provided for guar gum exports. We are studying the proposal," said an official.

The government of India introduced six per cent subsidy to promote exports five years ago, when price of the commodity was ruling at Rs 700-800 per kg. Now, the prices have surged to Rs 15,000 a kg.

India is the largest producer and exporter of guar gum supplying 90 per cent of the world consumption. It produces 1-1.5 million tonnes of guar seed annually, which is processed into about 0.3-0.5 million tonnes of guar gum.

Ganesh Gupta, ex-president of the Federation of Indian Export Organizations, said, "China introduced import duty on guar gum powder and splits. If India considers imposition of export duty, countries like China would be forced to roll back duty on guar gum and the benefit would accrue to India."

According to an official with Rajasthan Guar Gum Association, withdrawal of incentives and imposition of export duty would result in a substantial revenue generation and saving to the exchequer. Along with gum, the country exports its by-products known as guar meal. Export of guar seed derivatives (gum and meal) grew 85 per cent from 2,18,000 tonnes in 2009-10, to 4,03,000 tonnes in 2010-11.

In terms of value, the rise was impressive at about 148 per cent (Rs 1,133 crore to Rs 2,812 crore).

This financial year, in April-June, 145,000 tonnes of guar derivatives were exported, as against 71,340 tonnes in the same quarter last year.

If the trend continues, the country may export about 581,000 tonnes of guar derivatives worth Rs 6,245 crore.

Currently, guar gum splits, powder and guar meal exports are covered under the Vishesh Krishi and Gram Udyog Yojana, wherein five per cent of free-on-board (FOB) value of exports are waived by way of duty credit while importing goods. The products also enjoy one per cent duty drawback. In view of the robust growth of exports, increasing prices of the products and excellent margins enjoyed by the industry, there is an increasing demand for considering withdrawal of the promotional incentives.

According to industry experts, there are very attractive margins throughout the value chain, while farmers, too, have benefited from the price rise, the maximum amount of profits are accruing to processors, exporters and importers. The government seems to be the only entity losing on potential revenues it could have garnered in the form of export duty. China, which is completely dependent on India for guar gum, levies an import duty of 15 per cent on guar gum powder and seven per cent gum splits.

The 20 per cent export duty may fetch around Rs 1,250 crore over and above the Rs 375 crore it is currently doling out as incentives.