NEW DELHI: The Union Government has decided to regulate imports of vanaspati oil from Sri Lanka and has appointed the National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) as the sole agency for such imports.

"Import of vanaspati under the Indo-Sri Lanka Free Trade Agreement shall be made only by the NAFED,'' the Directorate General of Foreign Trade said in a notification.

The import of vanaspati (hydrogenated vegetable oil) includes bakery shortening and margarine. The oil is used for cooking in households and bakeries.

The decision follows demands from domestic manufacturers that zero duty imports from the island country were hampering the local industry.

Prior to this notification, any trader could import the commodity under the bilateral FTA. However, imports were restricted to a maximum of 2.5 lakh tonnes through an arrangement between the two countries where Colombo had agreed to India's demand that no permission be given for setting up new units in Sri Lanka.

There are ten vanaspati manufacturing plants in Sri Lanka and each of these is permitted to export up to 25,000 tonnes to India. Interestingly, many of these units are set up by Indian entrepreneurs. The domestic industry has welcomed the government decision, but said imports should be restricted to one lakh tonnes against the present 2.5 lakh tonnes.

"This was a necessary step to regulate the low priced imports of vanaspati to protect the domestic industry,'' the Solvent Extractors' Association of India Executive Director, B. V. Mehta, told PTI.