WORLD TRADE  
ORGANIZATION  G/SG/N/8/IND/14 
1 March 2005 
 (05-0852) 
Committee on Safeguards Original:   English 
  
 
 
NOTIFICATION UNDER ARTICLE 12.1(B) OF THE  
AGREEMENT ON SAFEGUARDS ON FINDING A SERIOUS INJURY  
OR THREAT THEREOF CAUSED BY INCREASED IMPORTS  
 
INDIA 
 
(Starch;  Manioc (Cassava, Tapio ca) based Sago and Modified Starches
) 
  The following communication, dated 24 February 2005, is being circulated at the request of the 
Delegation of India. 
 
_______________ 
 
  Please refer to this Mission's letter of even number dated 30 July 2004 forwarding therewith a 
copy of the Notice of Initiation of safeguard pr oceedings (No. SG/INV/1/2004, dated 7 July 2004) 
issued by the Director-General (Safeguards) against imports of Starch falling under Chapter 
Heading 1108, Modified Starches falling under Ch apter 3505 and Manioc (Cassava, Tapioca)BASED 
Sago falling under Chapter 1903 into India.  
 I am now enclosing a copy of the final finding dated 16 February 2005, in the above 
investigations, issued by the office of the DG (Safeguards). G/SG/N/8/IND/14 
Page 2  
 
 Office of the Director General of Safeguards 
Customs and Central Excise 
Department of Revenue, Ministry of Finance 
139, C.R. Buildings, I.P. Estate,  
New Delhi-110021 
****** 
 
F. No. SG/INV/1/2004        Dated  16.02.2005  
 
 
Sub: Safeguard Investigation concerning impor ts of Starch; Manioc (Cassava, Tapioca) 
based Sago and Modified Starches – findings 
 
Having regard to the Customs Tariff Act, 1975 and the Customs Tariff (Identification and 
Assessment of Safeguard Duty) Rules, 1997 (h ereafter referred to as SGD Rules) thereof. 
 
A. PROCEDURE
 
 
1. The Notice of Initiation of safeguard investig ation concerning imports of Starch; Manioc 
(Cassava, Tapioca) based Sago and Modified Starch es into India was issued on 7 July 2004 and was 
published in the Gazette of India, Extraordinary on 9 July 2004.  A corrigendum to the said notice of 
initiation was issued on 29 July 2004 which was also  published in the Gazette of India, Extraordinary 
on 3 August, 2004.  A copy of the Notice along with a questionnaire and the subsequent  corrigendum 
was sent to all known interested parties who were  asked to submit their response by 16 August 2004 
namely:- 
 
Manufacturers of Tapioca Starch/Sago/Modified Starch  
.     
(a) Maruthi Adhesive  Products, Chennai  
(b) Bajaj Chemicals Pvt. Ltd,Kolkata-1 
(c) Jai Glass and Chemicals Pvt. Ltd. , Kolkata -1 
(d) Sukhjit Starch & Chemicals Ltd., Phagwara  
(e) Bharat Starch Industries Ltd., New Delhi 
(f) Biotech Pvt. Ltd., Pune 
(g) National Starch & Chemicals India, Mumbai 
(h) N.B. Enterpreneurs, Nagpur  
(i) Fairdeal Trading Co,/ National Drugs & Chemicals, Mumbai 
(j) Sahyadri Starch & Inds. Ltd., Mumbai  
(k) Tooba Agro, Mumbai  
(l) Universal Starch Chem Allied Ltd., Mumbai  
(m) Amar Chemicals, Chhattisgarh  
(n) Goodrich Agrochem P. Ltd., Karnal  
(o) Anil Starch Products Ltd.. Ahmedabad  
(p) Dhariyal Chemical, Ahmedabad  
(q) Gujarat Ambuja Exports Ltd., Ahemedabad  
(r) Tainwala Enterprises, Bangalore  
(s) E.P. Industrial & Agro Chem. P Ltd., Secundrabad (AP) 
(t) Spac Tapioca Products (India) Ltd. Erode ( Tamil Nadu) 
(u) Varalakshmi Starch Industries Ltd, Salem-636007 (Tamil Nadu) 
  G/SG/N/8/IND/14 
 Page 3 
 
 
 Exporters  
 
(i)  P.S.C. Starch Products Co Ltd, Thailand 
 (ii)  National Starch & Chemicals, Thailand   (iii)  Meelunie BV, The Netherlands 
 (iv)  Qingdao Shengda Commercial Trade Co. Ltd., China 
 (v)  Shijiazhuang Zhong Ying Starch Co. Ltd., China  (vi)  Penford Food Ingredients, U.S.A.  (vii)  National Starch & Chem. Co., Korea RP  
 
Merchants & Traders
 
 
(a) Sabu Export  Salem (P) Ltd, Salem (TN) 
(b) Sabu Traders, Salem ( TN) 
(c) Garg Flavours, Kanpur 
(d) B.M. Savla & Co, Kanpur 
(e) Rainbow Industries, New Delhi 
(f) Shri Vijay Trading Co. Rajkot 
(g) Global Starch and Chemicals, Mumbai 
(h) Raichand Malshi, Salem (TN) 
(i) Sri Ram Starch Products, Salem ,Tamil Nadu 
(j) Suresh Enterprise, Salem(TN) 
 
Importers  
 
(i)  Spectrum Polymers,   Mumbai 
(ii)  ICI India Limited, Navi Mumbai 
(iii)  Matsushita Lakhanpa l Battery India, Vadodara 
(iv) BASF India Limited, Mumbai (v)  Synthetic Industries Chemicals, Kerala (vi) Hindustan Lever Limited, Mumbai (vii) CIPLA Limited, Mumbai 
(viii) Color Chem Limited, Mumbai 
(ix) Dr Reddy’s Laboratories Limited, Hyderabad (x) Ballarpur Industries, New Delhi 
 
Associations
 
    (a) The Salem Starch & Sago Mfrs. Service Industrial Co-Op. Society (Sagoserve ), Salem, 
Tamil Nadu 
(b)  Tamil Nadu Sago & Starch Mfrs. Welfare Association, Salem. 
 (c)  All India Starch Manufacturers Association Pvt. Ltd., ,Mumbai  
 (d)  International Starch Institute, Denmark 
 (e)  Thai Tapioca Starch Association, Thailand 
   2. A copy of the notice along-with a questionnaire was also sent to the governments of exporting countries through their High Commissions/Embassies in New Delhi namely Australia;  Chile; People’s Republic of China;  Finland;  France;  Germany;  Hong Kong, China;  Italy;  Japan;  Korea, RP;  
Malaysia;  the Netherlands;  Thailand;  United Stat es;  Vietnam and The European Union/Delegation of 
the European Commission in India.  3. Request for extension of time to submit their reply was made by the following interested parties including domestic producers.  Keeping their request in mind and the need to complete the investigation G/SG/N/8/IND/14 
Page 4  
 
 within the statutory period, extension of time requested was allowed and parties concerned were 
accordingly informed.  
 
(i) Thai Tapioca Starch Association, Bangkok  
(ii) Tamilnadu Sago and Starch Manufacturers Welfare Association (TASSMA) , Salem 
(iii) Sagoserve , Salem  
(iv) European Union Delegation of the European Commission to India    
(v) High Commission for Malaysia 
(vi) Varalakshmi Starch Industries Limited, Salem  
(vii) Matsushita Lakhanpal Batte ry India Ltd, Vadodara 
(viii) Embassy of the Socialist Republic of Vietnam, New Delhi 
 4. Replies to the Notice and to the questionna ire were received from the following parties:- 
 (i) Gujarat Ambuja Exports Limited , Ahmedabad 
(ii)  Spectrum Polymers Pvt. Ltd., Mumbai 
(iii) Jai Glass & Chemicals Private Limited, Kolkatta 
(iv) Spac Tapioca Products ( India)  Limited Erode, Tamil Nadu 
(v) National Starch and Chemicals India (ICI), Navi Mumbai 
(vi) Department of Foreign Trade, Thailand 
(vii) Dalian Happy Fortunes Trading Co. Ltd, China 
(viii) Maple Biotech Private Limited, Pune 
(ix) Ministry of Commerce of PR China 
(x) E.P. Industrial & Agro Chemicals Pvt Ltd, Secunderabad 
(xi) BASF  India Limited, New Delhi 
(xii) Tirupathi Starch & Chemicals Ltd, Indore 
(xiii) Rainbow Industries, New Delhi 
(xiv) Amar Chemicals , Dhamtari, Chattisgarh  
(xv) General Electric Apparatuses and machineries Trading Company, Vietnam 
(xvi) Hindustan Lever Limited, New Delhi  
(xvii)  Thai Tapioca Starch Association, Thailand 
(xviii)  Minh Phong Trading Company Limited, Vietnam 
(xix) Ministry of Trade  of the Socialist Republic of Vietnam, New Delhi 
(xx) Binh Phuoc General Import Export Company, Vietnam 
(xxi)
 Maruthi Adhesive Products, Chennai 
(xxii)  Matsushita Lakhanpal Batte ry India Ltd, Vadodara 
 
5.  A Public Hearing was given to all interested  parties on 6 December 2004 , notice  for  which 
was sent on 1 November 2004.  The interested parties were requested to file their written submission of 
oral arguments made by them by 13 December 2004;  collect replies filed by others on 14 December 
2004 and to file rebuttals if any, by 20 December 2004.    The following parties attended the public hearing: 
 
(i) European Union Delegation in India, New Delhi 
(ii) Bharat  Starch Industries Ltd., New Delhi 
(iii) E.P. Industrial & Agro Chem. P Ltd., Secundrabad (AP) 
(iv) Spac Tapioca Products (India) Ltd., Erode (Tamil Nadu) 
(v) Varalakshmi Starch Industries Ltd., Salem (Tamil Nadu) 
(vi) The Managing Director ,(Sagoserve), Salem (Tamil Nadu) 
(vii) Tamil Nadu Sago & Starch Mfrs. Welfare Association, Salem (Tamil Nadu) 
(viii) Farmers and Farmers Association of Tamil Nadu  
(ix) National Starch & Chemicals, ICI India Limited, Mumbai  G/SG/N/8/IND/14 
 Page 5 
 
 
 (x) BASF India Limited, New Delhi 
(xi) Corn Refiners Association USA  (through Counsel)  
(xii) The Socialist Republic of Vietnam  
(xiii) European Union Delegation of the European Commission to India    
(xiv) Solaris Biochemicals, Gurgaon 
 
B. VIEWS OF EXPORTERS AND EXPORTING GOVERNMENTS  
 
 The following main points have been made by them:  
 
(a) Department of Foreign Trade, Thailand  
 
 Thai Starch, Modified Starch and Manioc (Cas sava, Tapioca) based Sago is of a very high 
quality using state of the art technologies particularly at the production phase.  Thai exports to India are limited to a segment of the market requiring high qu ality and design of Thai Starch, Modified Starch 
and Manioc (Cassava, Tapioca) based Sago.  The consumers to whom the pr oducts are exported are 
unable to find the same quality from the Indian industri es.  Thai exports were a direct response to the 
overall shortage of supply of this product in India that confronted drought and high demand.  Thailand 
has not caused or contributed the alleged injury to  the domestic industry and should be excluded from 
the proceedings.  (b) Thai Tapioca Starch Association, Thailand
 
 
(i) Thailand is the world largest producer and exporter of Tapioca Starch.  It exported 
approximately 1 to 1.2 million tons during 2003-2004 to 90 countries but mainly in Asia Pacific.  Their 
major export markets were China;  Indonesia;  Mala ysia;  Hong Kong, China;  Philippines;  Singapore;  
Chinese Taipei;  and USA.  A number of their ma nufacturers have been accredited by International 
Standards Organization.  The product is used as th e base in various industries, for examples, MSG, 
lysine, sweeteners, dextrin, Modified Starches, Sa go and food.  Their product is well recognized for its 
quality both for food and industrial applications.   (ii) Thailand is major producer and exporter of Tapio ca based Modified Starches.  The industry and 
technology of tapioca based products , has been developed for over 30 years and comprises most of the 
world modified starch players.  Their growth of  export is significant, which derives from the new 
product development and successful introduc tion to appropriate applications. 
 (iii) Indian importation of Tapioca Starch and Modified Starches has been selectively made for 
sound industrial reasons and for the benefit of local I ndian industries.  Since the import tariff of India is 
already significant and relatively high regulating th e importation of new or alternative products from 
Thailand.  The safeguard measure, if  imposed, would impede the potential growth of the user industries.  
In the event of safeguard duty imposition not only ma jor industry like paper will be impacted but also 
the food and pharmaceutical will also be affected.  
(iv) The import of Tapioca Starch and Modified Star ches help in achieving marketing standards and 
to meet the temporary short supply over demand of the Indian industries.  (v) The volume exported to India is relatively small.  The increased import to India was due to the 
excess demand situation in India.  Indian user indus tries imported to fulfil the shortage of supply in 
order to maintain their business growth. 
 (vi) The volume of Tapioca Starch and Modified starches trends upwards while Sago volume is 
insignificant as would be evident form the following:   G/SG/N/8/IND/14 
Page 6  
 
 (In MT ) 
Products Tapioca Starch Modified Starch Sago 
HS Code 1108.140.007 3505.100.XXX 1903.000.014 
Year2001 1,129.5000 68.771 252.000 
Year2002 227.500 229,771 NA 
Year2003 8765.775 3,302.898 309.000 
Jan-Jul2004 4596.500 5,038.718 63.000 
 
(vii) The Association could not have access to the de tails of industrial users/consumers in India.  
From general discussion, they assume that a majority  of Tapioca Starch is used as raw material for 
Modified Starch industry in India while the Modi fied Starches emanating from Thailand are mainly 
used in Paper industry and a small quantity used in Food and pharmaceutical Industries.  
 
(viii)  Their global export volume of Tapioca Starch Products was as under: 
       
(in MT) 
Product Tapioca Starch Modified Starch Sago 
HS Code 1108.140 3505,100.XXX 1903,000
Year2001 748,819 216,783 17,995
Year2002 767,252 458,408 20,754
Year2003 1,008,079 525,515 20,281
Jan-Jul2004 618,865 367,831. 13,964
 
 Their average selling prices of starch to India was as under: 
 
Their average selling prices of Starch to all Countries was as under: 
 
Year Tapioca Starch Modified Starch 
 Quantity 
(Metric Tons) Value 
(Baht) Unit Price 
(Baht/Ton) Quantity 
(Metric Tons) 
 Value (Baht) Unit Price 
(Baht/Ton 
2001 748819 5475897350 7313 216783 3887944560 17935 
2002 767252 5796858102 7555 458408 7823763115 17067 
2003 10008079 6882723174 6828 525525 8780038986 16708 
2004 
(July) 618865 4250334293 6868 367831 5801713644 15773 Year Tapioca Starch Modified Starch 
 Quantity 
(MT) Value 
(Baht) Unit Price 
(Baht/MT) Quantity 
(MT) 
 Value 
(Baht) Unit Price 
(Baht/MT) 
2001 1,130 7,549,090 6,681 69 3,022,216 44,045
2002 228 1,724,265 7,563 230 6,859,449 29,835
2003 8,766 55216,702 6,299 3,303 40,183,292 12,166
2004 
(July) 4,597 28,989,693 6,306 5,039 62,837,487 12,471 G/SG/N/8/IND/14 
 Page 7 
 
 
 (ix) The average selling price of tapioca Starch to I ndia are slightly lower than the average selling 
prices to all countries primarily due to the volume of exports to India on monthly basis varied significantly.  When compared with price pattern of raw material in Thailand, they have averred that 
Indian importers mostly buy the products when  the prices in Thailand were relatively low. 
  
(C) Ministry of Commerce of PR China
 
 
(i) On a study of the import statistics as per DGCIS, Kolkatta they observe that the import of starch 
of wheat from China to India under Chapter H eading 11081100 during 1999 -2000 accounted for 20% 
of the total imports which declined to 7.93% dur ing 2003-2004.  (There was no imports from China 
during 2000-2001 and 2001-2002); the import of othe r starches under Chapter Heading 11081909 was 
6.15% of the total imports during 1999-2000 and there was no imports after 2000.  There was no import of starch of maize and starch of Potato from Chin a during 1999-2004.  Their share of the total imports 
of Modified Starch was only 0.28% during 1999-2000, 0.01% during 2000-2001, 0.11% during 2001-2002, 0.26% during 2002-2003 and 0.19% during 2003-2004.  China did not export sago (Tapioca 
based) under CH 19030000 during 1999-2004. 
 
(ii)  Article 9 of WTO Safeguard Agreement prov ides that safeguard measures shall not be applied 
against a product originating in a developing count ry as long as its share of imports of the product 
concerned into  the importing Member Country does not exceed 3 %provided that developing country 
Members with less than 3 per cent import share coll ectively account for not more than 9 % of total 
imports of the product concerned. 
 
(d)    Ministry of Trade, the Socialist Republic of Vietnam
 
 
 Over the past years, the economic and trade relationship between Vietnam and India has been 
developing.  The total turn over of bilateral tr ade reached US$337.7 Millions in 2002 and US $489.7 
Millions in 2003.  The trade balance between Vietna m and India has been continuing to grow steeply 
and the trade gap is considerably large and is in fa vour of India.  They believe that the export of the 
goods under investigation is not remarkable.  They would like express their concern that the trade action 
by way of Safeguards will affect the interests of Vietnamese exporters/producers as well as Indian 
consumers besides influencing the good bilateral ties between the two countries. 
 
(e)  Corn Refiners Association, USA  
 
(i) The Corn Refiners Association Inc. ( CRA) representing corn starch industry of the 
United States account for approximately 95% of total US Starch production and exports to India.  They 
have stated that there is no justification for a findi ng that Starch imports are causing “substantial injury” 
to Indian Starch products.  Starch import penetrati on has been extremely low over the most recent five 
year period reaching no higher than 0.9 to 1.8 % of domestic production at its peak.  Such an insignificant market penetration could not have ha d any measurable impact on the health of the 
domestic industry which not only occupies a dominant share of the market but also is insulated from 
import competition due to high degrees of captive consumption.  Domestic producers also are not 
threatened with injury by reasons of imports as th ere is no likelihood that future imports will exceed or 
even match their current leve l of market penetration. 
 (ii) There is a general consensus amongst most par ties that the scope of the present investigations 
should be narrowed to Native Tapioca Starch a nd Sago.  In their written submissions of TASSMA & 
SPAC it has been stated by them that they have  sought safeguard duty protection specifically on 
Tapioca Starch and Sago.  The Director General therefore may please narrow the scope of the investigation to the products under Tariff 110814 00(Native Tapioca Starch) and Sago falling under 
1903 of the Tariff as there is no basis for imposition of duty on pr oducts under 1108.11., 
1108.12,1108.13 and 1108.19 .  Any relief deemed necessary by the Director General should be limited G/SG/N/8/IND/14 
Page 8  
 
 to exclude Modified Starches falling under 3505 of the Customs Tariff Act 1975 as these products 
largely do not compete for sales with Indian domestic Starch production.  (iii) They have asserted that raw starches and modi fied starches are not directly competitive with 
each other.  Modified starches are fundamentally diff erent from native raw starches.  Modified starches 
under Chapter 3505 in their various forms are physically and functionally distinct from the classes of 
native starch that fall under Chapter 1108.  The term  like article is generally understood to refer to 
products that are physically identical and the term dir ectly competing articles refers to products that are  
physically interchangeable.  Modified starches do not meet the statutory standard of being identical or 
alike in all respects to native starches and should be  treated by the Authority as separate articles for 
assessment of injury parameters.  
 (iv) The overwhelming majority of the Modified Star ch industry is not even a participating party in 
this case and there is simply no data base on which there can be a finding of injury with respect to 
domestic producers of Modified starch. 
 
(v) Their understanding is that the Tamilnadu c ooperatives that have spear headed the safeguard 
investigation do not produce Modified Starch of an y variety in meaningful quantities and meet the 
demand of specialty products of very high quality.  (vi) They have also urged to treat Manioc b ased Sago under Chapter 1903 as a separate article and 
to exclude the increase in imports for purposes of de termining whether the Indian Starch industry has 
been injured by imports within the meaning of the saf eguard law.  They have averred that Manioc based 
Sago generally in the form of flakes, pearls or grai ns is to be more properly viewed as a downstream 
product prepared from Starch.  
(vii) Both Indian law and the WTO agreement on saf eguards require a causal link between increased 
imports and serious injury or threat of serious injury .  A determination of serious injury or threat of 
serious injury shall not be made unless the investig ation demonstrates on the basis of objective evidence 
the existence of the causal link between the incr eased imports of the produc t concerned and serious 
injury or threat thereof.  Th e investigating authority must es tablish a genuine and substantial 
relationship of cause and effect between the increased  imports and serious injury.  Any injury resulting 
from factors other than increased imports are not to be attributed to imports. 
 (viii) Imports of the starch products under inves tigation cannot by any reasonable standard be a 
significant cause of serious injury since they repr esent a miniscule share of the domestic industry.  
Third party estimates of Indian starch produc tion including Maize and Tapioca range from 7775000 
MTs to 10800000 MTs per year inclusive of captive cons umption.  The total global imports of starch 
into India are a mere 10000 MT at their highest level of market penetration.  According to them the imports occupied a market share of 0.96 to 1.3% of total production including for captive use and between 1.2 to 1.8% excluding captive consumption.  (ix) The WTO Appellate Body report in the Ar gentinean Footwear case has stated that a mere 
increase in imports is not adequate to support a safe guards action.  The level of imports in the market 
must be large enough to establish cau sation.  Although the increase in imports form 2002-03 to 2003-04 
may appear significant in abstract terms, from 3762 MT s to 11875 MTs the influence of that increase on 
the domestic industry was immaterial which cannot be the basis for a substantial injury finding. 
 
(x) The proportion of domestic production that is cap tively consumed is effectively insulated and 
protected from any perceived negative impact of impor t competition.  A substantial portion of imports 
are directed towards higher quality higher priced niche products where domestic production competes to a much lesser degree than in the context of lower quality starches.  
  G/SG/N/8/IND/14 
 Page 9 
 
 
 (xi) Domestic industry has calculated the quantum of safeguard duty based on the cost of production 
and an added fair margin.  The figures used in a rriving the quantum are misleading. Fixing a duty based 
cost of production in an aberrational year (2003-04 ) unjustly inflates the gap between import prices and 
fair market price.  They have requested the Director General that the quantum of safeguard duty if decided to be imposed should appropriately adjusted. 
 
(xii) Apart from the absence of any evidence of causation between  imports and injury to the 
domestic industry there is clear evidence demonstra ting that extraneous factors having nothing to do 
with import competition have had a demonstrable influence on the condition of Indian starch producers .  
A number of adverse conditions have been widely r ecognized in the domestic industry.  There has been 
a substantial increase in the price of raw mate rials for Cassava based starch which accounts for 
approximately 30-40% of total domestic starch production.  Between 2002and 2004 the price of 
Cassava almost doubled from Rs 1800PMT to Rs 3500PMT mainly on account of drought and consequent water scarcity.  The production of cassav a based starch is heavily dependent on a large 
supply of fresh water, about 4-6 Tonnes of water are required for each Tonne of Tapioca tuber crushed.  
The productivity if the starch manufacturing units h as been adversely affected by the high rate of 
ground water depletion in the past five years.  The in crease in the cost of energy has also had an adverse 
impact on prices because the main source of water is through the operation of bore wells.  The impact of water scarcity has been most acu te in the small scale sector where the number of starch manufacturing 
units has fallen form over 1000 Units to about 600 in the last few years .  Rising raw material prices 
coupled with an increasing inability to compete with large scale domestic manufacturers has caused 
injury which in part is attributable to the econom ies of scale and partly due the abandonment of certain 
excise duty related preferential treatment given to sma ll units.  It is these extraneous factors and not the 
minimal level of imports has caused any injury.  Im ports do not pose a threat of serious injury the 
domestic industry for two principal reasons namely  
(a) demand for starch in India is projected to gr ow rapidly in the next several years.  Such 
growth will allow sufficient space for expansion of the domestic industry beyond its current annual production. 
 
(b) there is no expectation that import penetr ation will increase or even maintain 2003-04 
levels in the future. 
 
(f) Minh Phong Trading Company Limited, Vietnam
 
 
 They have exported a quantity of 684 MT of Ta pioca Starch during 2003 (June 2003 to October 
2003).  
 
(g)  European Commission   
 
(i) They consider that the proceedings initiated do not allow interested parties to fully exercise 
their rights under Article 3 of the WTO Agreement on Safeguards.  As per Article 12.1 of the WTO 
Agreement on Safeguards the Members are required to give the reasons for initiating a safeguard 
investigation. 
 (ii) The notice of initiation targets a range of star ch products and derivativ es belonging to different 
Customs chapters.  However, native and modified starches cannot be used interchangeably and are 
therefore neither like products nor directly competitive.   While native starches in ter alia tapioca, corn 
and wheat are basic commodities with very genera l usages, the modified starches undergo chemical 
transformation and serve specific purposes.  The two starch categories therefore belong not only to different market segments but also different price se gments. In view of the fact that the two products 
serve different purposes and do not compete in the same  price segment, they consider that the product G/SG/N/8/IND/14 
Page 10  
 
 scope is far too broad for being cl ubbed together.  It would have been advisable to initiate separate 
investigations on the two product groups. 
 
(iii) The domestic industry seeking protective measures must necessarily constitute a major proportion of the domestic industry. There is no clear identification of the domestic industry.  With 
respect to native starches (tapioca) there has onl y been one submission by the domestic producers 
namely Tamil Nadu Starch and Sago Manufacturers Asso ciation which is located in the region of Tamil 
Nadu.  It remains to be clarified what percenta ge these producers represent on a country wide scale and 
what proportion of these producers have extended their support.  
(iv) The domestic industry of Modified starches is represented by a single starch manufacturing unit 
Bharat Starch Industries Ltd who has neither advanced  any data on its share in domestic production and 
consumption nor any evidence of the existence of seri ous injury or even threat thereof as a result of 
increased imports.  
(v) In the event of the authorities decide to propose imposition of definitive safeguard measures 
they expect to receive all pertinent informati on as per Article12.2 of WTO Agreement on Safeguards. 
 
C. VIEWS OF  IMPORTERS/USER INDUSTRIES
 
 
 They have made the following main points: 
 
(i)  Maruti Adhesive Products, Chennai  
  
 They have suggested that prices and quality of Starch be controlled on par with imported starch 
for meeting export obligations. 
 
(ii)  ICI India Limited, Navi Mumbai  
  
(a)  They are a Public Limited company, engage d in the manufacture and sale of Paints, Specialty 
Performance Chemicals, Adhesives and Starches ha ving a combined turn over of Rs 685 Crores during 
2003-04.  Starches can be broadly classified into Nativ e Starches, Dextrins and Modified Starches.  The 
products in which they trade are not in competition with the Starch domestica lly manufactured as they 
are widely different to locally manufactured starch in respect of application, price band and process of 
manufacture . 
 
(b)  They imported the 73MTs, 142MTs and 261Mts of   Modified starches falling under Chapter 
sub heading 35051090 of the Customs tariff during the years 2001-02, 2002-03 and 2003-04 
respectively.  (c) Their products offer unique functional attr ibutes-product and end use benefits in Processed 
Food & Beverages, pharmaceuticals and Personal Care .  Their product complies with international 
quality and regulatory standards and the import prices are significantly higher than locally 
manufactured starches.  Imposition SGD on special starches like the ones imported by them will not 
only defeat the purpose but also make the end users of specialty starches globally non competitive.  The 
end-user industries like Pharmaceuticals, Processed Food and Personal Care will lose the share of the 
domestic market to the exporters of the final pr oducts and deprive them of the export opportunities 
especially in the light of nil/nominal import duty paid by their global competitors. 
 
(d) They have urged that SGD if any imposed s hould be applicable only if the CIF value of the 
imports is less than Rs 22 /Kg for native starch, Rs 45/Kg for Dextrin & Malto Dextrin and Rs 60/Kg 
for modified Starch.  
  G/SG/N/8/IND/14 
 Page 11 
 
 
 (iii) Jai Glass and Chemicals Pvt Ltd. Calcutta . 
  They are crushing tamarind seeds after de-husking into powder and have no comments to offer.  
(iv) Rainbow Industries, New Delhi
 
 
 They are traders of the domestically manufactured starches and have stated that domestic producers should be protected on a priority basis.  They support the measures that may be taken to safeguard the interest of the domestic producers.  (v) E.P. Industrial & Agro Chemicals Pvt Ltd, Secunderabad
 
 
 They are manufacturers of Pre-gelatinised Starch based on Maize Starch, Tapioca Starch and 
Potato Starch and export more than 90% of their product to various countries.  As part of their 
requirement besides procuring locally from domestic manuf acturers,   they import Starch on the basis of 
Advance Licence for meeting export obligations.  Th ey had imported a quantity of 617 MT of Tapioca 
Starch during 2003-04 against Advance Licences.  
 
(vi) Spectrum Polymers Pvt. Ltd., Mumbai  
 
 They import Tapioca Starch under duty free Advance Licences for manufacture of Modified 
Starch to be used as Adhesives in making corrugate d boxes and other packing use.  The Tapioca Starch 
is mainly manufactured in India by cottage industrie s and their quality is not consistent vis-a vis the 
imported Tapioca Starch.  Of late the demand for dom estic Tapioca starch has declined as Maize starch 
is being substituted in some Industries being cheaper than Tapioca Starch particularly during the last 2 
years.  The price of Tapioca starch has gone up by  30% to 40% during the last couple of Years. The 
consumers of Tapioca Starch are shifting to Maize star ch in order to be competitive in the market.  Any 
increase in price of Tapioca starch or imported Tapio ca Starch will adversely affect the user industry.  
They are importing the starch mainly because of better quality.  They are also buying Tapioca starch 
locally to manufacture Dextrin powder and modified Tapioca Starches of other grades to cater to the 
domestic consumers.  (vii)  Maple Biotech Pvt. Ltd., Pune
 
 
 They have stated that Potato Starch is not ma nufactured in India in good quality and quantity.  
For manufacture of Sodium Starch Glycollate Potato Starch of high quality is required. 
 (viii) Matsushita Lakhanpal Battery India Ltd, Vadodara
 
 
 They are not importing/using st arch falling under Chapter 1108 and Manioc (Cassava/ Tapioca) 
based Sago falling under Chapter 1903 of the First Sc hedule under the Customs Tariff Act, 1975.  They 
are importing Cellux, Longam and Rice Powder falli ng under Chapter 3505 of the First Schedule under 
the Customs Tariff Act, 1975.  To their knowledge th ese materials, of particular grade and quality, 
required by them for the manufacture of Dry Cell Batteries are not manufactured at all in India.  Their 
imports are  only from Japan, Thailand and China.  They have requested to exclude these items imported 
by them from the purview of any safeguard investigation.  G/SG/N/8/IND/14 
Page 12  
 
 (x) Solaris Biochemicals Limited,  Gurgaon
 
 
 They are manufacturers of Citric Acid and thei r plant is located near Vadodara. Native Starch is 
a critical raw material for their manufacturing process and requires large quantities of regular supplies with consistent quality.  Variations in quality will adversely affect their production in terms of volume, 
cost and quality.  Most of the Tapioca Starch manufacturers are in the unorganized sector with small 
capacities.  They will be required to meet their re quirements from a large number of manufacturers and 
they apprehend that they would not be able to ge t consistent quality Starch.  While the production of 
Tapioca Starch is a seasonal operation coinciding with  the harvesting season, their operations are spread 
throughout the year.  
 
D. VIEWS OF DOMESTIC PRODUCERS
 
 
(a)  Tamilnadu Starch and Sago Manufacturers Welfare   Association, Salem (TASSMA ) 
  They have made mainly the following points. 
 1.  A representation was addressed by them to th e Union Finance Minister for increasing the 
Customs Duty and levy of Safeguard Duty on impor ts of Starch, Sago and Modified Starches as the 
imports of these products witnessed an exorbitant  increase during the year 2002-03 and 2003-04 in 
particular, against negligible imports during the y ear 2001-02.  The increased imports at lower prices 
have caused serious injury to the industry as well as posing serious threat to its very survival.  
 2.  There are about 700 Tapioca  Starch & Sago manufacturers, of which 448 are active units 
spread over eight districts in Tamilnadu, namely  Salem, Namakkal, Erode, Dharmapuri, Villupuram, 
Thiruchirapally, Perambalur and Tiruvannamalai.  Th e Starch & Sago industry, in Tamilnadu, is more 
than six decades old and the industries in this regi on contribute almost 90% of the country’s Tapioca 
Starch & Sago production in the country.   3.  About five Lakh families of farmers and agricultural labour (including about 80,000 tribal 
families) are engaged in tapioca cu ltivation in this region.  Tapioca cultivation is the backbone of the 
rural economy and the only livelihood in these eight di stricts.  Any injury that may be caused to the 
Starch, Sago & Modified Starch industries will di rectly impact adversely the farming community 
especially the tribal and can lead to a serious agrarian unrest.   4.    An estimated amount of more than of Rs 300 Crores has been invested in this industry over the 
period.  
5.  Sago, popularly known as Sabudana, is used in  preparation of food dishes and is consumed 
throughout India.  It is used as a substitute to Wh eat/Rice and in some parts of the country used to 
prepare sweets.  It is largely consumed in the st ates of Maharashtra, Gujarat, Madhya Pradesh, Uttar 
Pradesh and West Bengal..  The product is very uniqu e to Indian market and h as been produced mostly 
by Starch & Sago manufacturers based in and around Salem, Tamilnadu . 
 
6.  Starch is used as a raw material for food in dustry and manufacture of Modified Starches for 
industrial applications.  In the food industry Starch  is used in making Soups, Noodles, Vermicelli, 
Sauce, Ice cream, Bread, Cake and Confectionery.  Th e starch is supplied to modified starch industry, 
who manufactures modified starches for Textile industry, Paper Industry, Adhesive & Glues, 
Pharmaceuticals etc. 
 7.  The Starch & Sago industry is well established wi th substantial capacities to meet the entire 
demand of the Country.  The manufacturing units are well equipped with necessary machineries, fully  G/SG/N/8/IND/14 
 Page 13 
 
 
 mechanized or semi-mechanized, well trained and e xperienced work force and necessary infrastructure 
to gear up and meet any enhanced demand in years to come.   8.  The Starch & Sago industry is fully supporte d by The Salem Starch and Sago Manufacturers 
Service Industrial Co-operative Society Ltd., (S AGOSERVE), under the administrative control of 
Tamilnadu Government.  SAGOSERVE was establishe d in 1981 to channelise Starch/Sago distribution 
and provide common infrastructure to the manufacturers such as storage facilities, auction logistics, 
addressing to the problems and needs of the manufact urers, providing finance, technical advice and 
protect the varied interests of the manufacturers.  Most of the production of the domestic manufacturers is sold through SAGOSERVE.  
 
9.  The production of Starch & Sago has been by and large very stable and progressive, barring a 
few years when the production varied marginally du e to certain unavoidable natural constraints.  The 
industry was very healthy and pr osperous until 2000-2001, when the manufacturers were operating at 
optimum capacity with fair margins and tapioca fa rmers were getting a fair price for their produce.  
However things started changing in 2002-03 when im ports of tapioca based Starch, Sago and Modified 
Starches started entering into country in substantia l quantities though the imports of these products were 
also noticed in earlier years, but in meagre quantities.   10.  The imports of Tapioca based Starch, Sago and Mo dified starches, which were insignificant till 
about 2001-02, witnessed a sudden and sharp rise st arted increasing in 2002-03 and became more 
prominent in 2003-04, that too at very low prices.  While the imports of Starch and Sago was earlier 
noticed to be emanating from number of countries, but during 2003-04, it was observed that the imports 
were mainly from Thailand and Vietnam.  One of th e reasons for such imports into India from these two 
countries was due to large surplus capacities availabl e with them and certain conditionality imposed on 
their products by developed countries, particularly the European Union.  
 
11.  Triggered by reducing Customs Tariff regime, the imports that were initially trickling into our 
country has now reached a quantum, which is endangeri ng the domestic industry.  The imports of starch 
which was about 428 MT in 2001-02, increased to 1,072 MT in 2002-03, recording an increase of about 150% and further increased to 10,732 MT in 2003-04, recording a whopping increase by 900% over the previous year.  Starch imports has increased in 2004-05 also wherein a quant ity of about 4,762 MT 
appears to have been  imported in the first four m onths of 2004-05 (April 2004 to July 2004), which 
works out to an annualized import of 14,286 MT, resulting in an increase of 33% over 2003-04.  The 
imports of Sago which was a meagre 305 MT in 20 01-02, reduced to less than  1 MT (50kgs) in 2002-
03, shot up to 1,934 MT in 2003-04.  The increase in 2003-04 in terms of percentage is astronomical. 
 
12.  The capacity for production of Starch was 1, 54,650 MTS p.a. in 2001-02.  Prompted by the 
overall performance of the industry in the previ ous years, domestic manufacturers planned for 
expansions and thereby enhanced capacity to 1,59 ,000 MT in 2002-03, which however decreased to 
1,52,650 MT in 2003-04 due to large import parcels coming into the country.  The installed capacity of Sago has been steadily decreasing year after.  The capacity which was 231,650 MT in 2001-02, declined marginally to 229,650 MT in 2002-03 and further reduced to 220,900 MT in 2003-04.  As 
many units manufacture both Starch & Sago, the effect of depression in Starch market started telling on 
Sago production as well.   13.  Starch production was as high as 90,806 MT in 2001-02, dwindled to 63,530 MT in 2002-03. 
What was more of a threat to the domestic industry in 2002-03, turned out to be a nightmare in 2003-04 
when the production dropped to 62,703 MT in 2003-04, due to a sudden surge in imports in substantial 
quantities which almost captured 10% of the domestic market.   G/SG/N/8/IND/14 
Page 14  
 
 14.  Sago production, which was 165,509 MT in  2001-02, reduced to 122,036 in 2002-03 and 
further to 120,854 in 2003-04.  This was due to th e fact that performance of Sago industry is directly 
related to the Starch industry and any adver se effect on Starch permeates to Sago as well. 
 15.  Due to increased imports of starch at very lo w prices, the quantum of sales of Tapioca Starch 
which was 114,767 MT in 2001-02 decreased to 75 ,366 MT in 2002-03, representing a drastic drop by 
34%.  However the sales improved marginally by a meagre 301 MT in 2003-04, due to depletion of 
stocks at distressed prices.  The increase in sales per se does not reflect the health of the industry since 
such sales could be achieved only at reduced prices.   
16.  The quantum of Sago sales has also been a ffected with sales dropping from 147,682 MT in 
2001-02 to 108,215 MT in 2003-04 , representing a fall of 27%.  This downward trend caused by the 
market disruption due to surge in imports of Starch & Sago continued in 2003-04.  17.  Starch manufactured by the domestic producers is  of international standards having same end use 
characteristics to that of the imported starch.  Prominent customers including MNC’s have been buying 
domestic starch in large quantities and the domestic producers had also exported which in itself would 
show the domestically produced starch was in no wa y inferior to the imported starch.  Quantity of 
Starch that was purchased by some  leading customers declined from 10,600 MT in 2001-02 to 4,790 
MT in 2003-04, when the imports were on the peak a nd subsequently to a meag re quantity of about 713 
MT in 2004-05 (up to July, 2004).  This was primar ily due to prices at which the goods have been 
imported and not the quality of the product which had a direct impact on the quantum of Starch that the 
domestic industry was capable of selling.   18.  The increased imports of Starch at lower pric es had an adverse bearing on the inventory of 
starch.  This is reflected in the increased invent ory position of SAGOSERVE, where the finished stock 
of Starch manufactured by the domestic producers is stored.  The inventory of starch increased from 
10,343 MT as on 31.03.2003 to 14,829 MT as on 31.03.2004, resulting in an increase of about 43%.  Whereas the stock of Sago which was 12,900 MT as on 31.03.2002 increased to 20,590 MT in 2002-03.  
Even though the Sago stock d ecreased to 14,300 MT as on 31.03.200 4, this was higher than the 
inventory position as on 31.03.2002 by about 11%.  Th e decrease in the inventory of Sago is primarily 
due to reduced productions and depletion of existing stocks at lo wer prices to match the import prices. 
 
19.  Despite the decrease in production in 2002-03 & 2003-04, the inventory of Tapioca Starch & 
Sago increased considerably.  This reflects the plight  of the domestic manufacturers who have not only 
reduced their production, even at such reduced prod uction, stocks started piling up because of low cost 
imports.  The manufacturers were waiti ng for better realization to dispose their stocks but with low cost 
imports flooding the market, they started liquidating their stocks even at loss. 
 20. The increasing inventory levels has the following adverse impact on the domestic industry: 
 
a. The increased inventory is directly translat ed into increased in terest cost for the 
working capital facilities availed by the domestic manufacturers either from 
SAGOSERVE and/or from Banks. 
b. The domestic manufacturers, waiting for the prices to stabilize due to the disruption 
caused by imports, keep incurring heavy god own rental charges and cost over runs. 
c. The moisture contents of Starch & Sago k eep depleting resulting in weight loss and the 
frequent and prolonged sample lots drawn for auction contributes to the loss of actual 
quantity sold. 
d. With the cycle of sales being disturbed, the manufacturers are put in great difficulty in 
raising funds for procurement of tuber and production in subsequent cycles. 
  G/SG/N/8/IND/14 
 Page 15 
 
 
 21. The selling prices have declined in all the m onths in 2004 as compared to the corresponding 
month in 2003, which is mainly due to increased imports and Customs Duty reduction on Modified 
Starch in January 2004.  The Modified Starch  industry which sources Starch from the domestic 
manufacturers for manufacture of such Modified Star ches, started negotiating and offered lesser prices 
to the domestic manufacturers of Starch with reference to the landed cost of imports. 
 
22.  The import price (assessable value) of Starch, which was Rs 8,363 per MT in September 2003, 
declined to Rs 6,218 per MT in March 2004. Simila rly Sago prices also registered a decline from Rs 
6,665 per MT in June 2003 to Rs 6,434 per MT in  November 2003.  To compete with the decreasing 
import prices and to retain the customer base the domestic manufacturers were forced to reduce their 
prices.  The landed cost of imported Starch was as low as Rs 8,164 MT and to match this price the 
domestic manufacturers have been forced to drop their prices from Rs 12,027 per MT in September 
2003 to Rs 9,465 in July 2004, resulting in drop of Rs 2,562 per MT which works to a drastic decrease of 21%, thereby causing severe injury to the domestic producers.  
23.  The adverse impact of imports is also evid ent in Sago prices.  The domestic selling prices 
which prevailed at Rs 15,764 per MT in September 2003 declined to Rs 14,954 in July, 2004 because of 
imports at a landed cost of 8,448 per MT.  Though in  terms of the quantity of imports, the injury in 
Sago is not as much on Starch, the threat of injury  based on the price parity is clearly evident.  
 
24.   The number of employees employed in Starch & Sago manufacturing units which was 12346 in 
2001-02 declined to 11040 in 2003-04 mainly due to retrenchment of workers by units as they were 
unable to realize even their cost of production, as the import-selling price was far below the cost of 
production.  It is pertinent to mention here that th e Starch and Sago industry employs indirect labour in 
the form of tapioca pluckers, peelers, loading/unlo ading labour, Transport workers, etc as much as five 
times the direct employment.  This indirect employme nt will equally be adversely affected in the event 
of imports arriving in India unabatedly.  Any further injury to the industry due to increased low priced 
imports will force many units to close down resulting in  loss of employment  for so many workers.  The 
loss is not restricted to the domestic manufacturers alone.  The number of units that are being closed year after is increasing rapidly. If the domestic i ndustry is not protected from the injury caused by 
unabated imports, many more units will be forced to  close down and the industry already at peril, will 
fast perish. 
 
25.  The Tapioca farmers who are more than five lakh in number will also be jobless.  These farmers 
do not know any other job other than farming.  Furthe r, given the climatic and topological factors, no 
other cultivation other than Tapioca tubers is feasibl e in this region.  Apart from the farming community 
a lot of ancillary industries and trade are solely or  substantially dependent on Starch & Sago industry 
like Packing , Transport which employs direc tly and indirectly a large work force.  
  26.  About 3,636 MT of Tapioca Starch was imported in April 2004 which was almost equal to their 
one month’s average sale during 2003-04, effected in the entire country.  This unprecedented quantum 
of imports had a drastic effect on the selling prices.  The sale price of Starch which was Rs 10,616 per MT in March 2004 started dropping every month w ith market flooded with imported starch, to Rs 
10,533 in April 2004, 10,409 in May 2004, Rs 9,825 in June 2004 and finally to Rs 9,465 in July 2004.  
Even the sale quantity of starch at Sagoserve was adversely affected.  The sales which were 5,722 MT 
in March 2004, because of huge imports in April 2004 , reduced to 3,652 MT in Aril 2004, 3,493 MT in 
May 2004 and finally to 3,402 MT in June 2004.  The imports totally started displacing the domestic 
industry’s sales.  This clearly estab lishes the market disruption caused by imports and the consequential 
injury caused to the domestic industry .  
 
27.
  The market disruption is caused mainly because of imports of Starch and Sago.  The domestic 
manufacturers with their decades of experience in th is business are fully geared to face competition, of 
course with a level playing field.  The price parity  between the domestic prices and import prices has G/SG/N/8/IND/14 
Page 16  
 
 put the domestic market in an unenviable position.  By imposing safeguard duty on imports of Tapioca 
based Starch and Sago a level play ing field will be created, thereby promoting a healthy competition for 
the industry.  28.  Safeguard duty must also be levied on Tapioca based modified starches, as the domestic 
manufacturers are also affected by import of Tapioca based modified starches which   has a direct and 
adverse impact on the domestic starch industry, as the off take of Tapioca starch by Modified Starch manufacturers industries has dwindled considerably  and some of them even stopped purchasing by 
resorting to direct imports.   
29.  The Starch and Sago manufacturers are competent and the Indian consumers and industries 
have reposed great faith on the quality and standard s of Starch & Sago manufactured by them.  Many 
modified starch and food industries have been purchasing starch manufactured by them in large 
quantities for years, which reflects the commitmen t of the Starch and Sago manufacturers to its 
customers and quality parameters. 
 
30.  They are seeking a safeguard duty of Rs 6,429 on Starch and Rs 6,708 on Sago for minimum 
period of four years.  The domestic industry is conf ident of becoming more ef ficient to meet the new 
challenges in Tapioca based trade.  The safeguard dut y sought on Starch and Sago should be in force for 
a minimum period of four years to enable them to restructure to bring about cost reductions to stay 
competitive vis-à-vis imports. 
  
31.   A Technical Advisory Committee has been set up under the direct supervision of 
SAGOSERVE.  The Committee has identified various means and methods to improve the productivity and efficiency of the industry.  They are also cl osely coordinating with CTCRI, the Nodal Agency and 
leading organisation in the sphere of technology tran sfer of tuber crops in India, for conducting and co-
ordinating research on various aspects of tropical tuber crops in India.   
 
(b)  Spac Tapioca Products ( India) Limited, Erode (Tamil Nadu
) 
 
 They have mainly stated the following : 
 
1. They are a Public Limited Company manufact uring Tapioca Starch.  The Company has 
distributors in all major Tapioca markets and also supply directly to its customers.  They are exporting their produce to various countries and their product h as been accepted by the in ternational customers.  
They are certified and accredited ISO 9001:2000 comp any for manufacturing and marketing of Tapioca 
Starch for food and Industrial applications.  The Director of Drugs Control, Tamilnadu, has also 
approved them as one of the manufacturers supplying Tapioca Starch for Pharma ceutical applications.  
The Starch manufactured by them are exclusively Ta pioca based and has similar end use characteristics 
to that of the imported Starch.  They have full fl edged quality controls and only after testing each lot, 
for its quality parameters, their produ ce is supplied to the customers. 
 2. Starch is used as a raw material for food industry and modified starches for industrial 
applications such as Paper, Textile, Adhesives, Pharma ceuticals etc.,  In the food industry Starch is used 
in making Sago, Soups, Noodles, Vermicelli, Sau ce, Ice cream, Bread, Cake and Confectionery.  
 3. Starch as a product has no substitute/alternative. Ce rtain synthetic products have been tried as a 
substitute for Starch made out of Tapioca and cer eals.  However the cost being prohibitive and high 
pollution caused by synthetic products (not bio-degr adable) to meet the properties of Starch has 
discouraged its use.  
 4. They set up their plant for manufacture of Tapioca Starch in the year 1999-2000 at a total 
investment of about Rs 16Crores.  The Company’s project was appraised by ITCOT and funded by  G/SG/N/8/IND/14 
 Page 17 
 
 
 Indian Overseas Bank in consortium with Bharat Over seas Bank.  The promoters on their part invested 
Rs 6.96Crores.  5. The Company set up a bio-gas plant as an altern ative source of energy for its Starch drying 
plant.  The effluent water that is generated afte r washing Tapioca Tubers at various stages contains 
various gases, which is converted into Methane g as, using a UASBR plant.  The power savings on 
account of this plant is estimated to be about 30%.  This plant, though planned and procured in earlier 
year, was commissioned recently.  The Company is planning for one more bio-gas which together with the existing plant will meet 50% to 60% of the power requirements of the factory.  The estimated cost 
of the above plant is Rs 20 lakhs and is being funded through internal accruals and the balance by the 
promoters. 
 6. The production which was as high as 22,661 MT in 2001-02, dwindled to 6,194 MT in 2002-
03, declined further to 6,054 MT in 2003-04.  It wa s primarily due increased imports at lower prices 
particularly during 2003-04.  Their capacity u tilization which was 62.95% in 2001-02, dropped to 
17.21% in 2002-03 and further declined to 16.82 % in 2003-04. 
 
7. Their sales including exports had considerably declined which was mainly due to imports 
coming into the country in large quantities.  Their stock position improved mainly due to sales at lower 
prices to   their customers and to keep their custom er base in tact, on landed cost parity basis.  The 
lower inventories during 2003-04 per se do not reflect the sound health of the company.  In fact they 
resorted to imports of 1216 MT during 2003-04, to cat er to the needs of thei r existing customers, who 
were negotiating with them at prices much below their cost of production . 
 
8. They had consumed captively very insignificant quantities of Tapioca Starch manufactured for 
trial production of Modified Starch during the last th ree financial years.  They consumed a quantity of 
about 116 MT in 2001-02, the consumption was 76 MT and 23 MT during the years 2002-03 and 2003-
04 respectively.  They did not pursue the production of Modified Starch since it became unremunerative 
due to large imports of Modified Starch by some of the leading consumers of their products.  They 
exported about 588 MT of Starch in 2001-02 and 218 MT n 2002-03, which includes deemed exports 
also.  Even though the prices of Starch have been  increasing they are not in commensurate with their 
cost of production.  
9. The Company’s performance in terms of profita bility has been on the downward trend, which is 
mainly due to unabated imports of Tapioca Starch, that too at low prices.  Even the profit earned was mainly because of the other source of income name ly in the form of interest etc., which was 
Rs 10,17,817 in 2001-02, 524,930 in 2002-03 and Rs20,30,801 in 2003-04.  In fact there has been operational loss in 2003-04, if the other income is excluded.  
10. Due to low capacity utilisation and sales, th e Company was forced to reduce its employee’s 
strength.  Any further injury to the Tapioca base d Starch industry will only aggravate the situation 
leading to more loss of employment .  
11. Triggered by a reduction in Customs Tariff, th e imports that was initially trickling into our 
country has now reached a quantum, which is enda ngering the domestic industry.  The imports of 
Tapioca Starch has steadily been increasing, what w as about 428 Mt in 2001-02 increased to 1,072 MT 
in 2002-04, recording an increase of about 150%  and further increased to 10,732 MT in 2003-04, a 
whopping increase of 901% over the previous year.    12. The total domestic sales of Starch, which was about 1,39,791 MT  in 2001-02, came down to 96,526 MT in 2002-03 and further declined to 93, 457 MT in 2003-04.  The position in respect of 
Apparent Domestic Consumption of Tapioca Star ch, which was 140,147 MT in 2001-02 declined to 
97,598 Mt in 2002-03 and register ed an improvement to 104,189 MT in 2003-04.  The increase was G/SG/N/8/IND/14 
Page 18  
 
 mainly due to imports which increased from 1,072 MT  in 2002-03 to 10,732 MT  in 2003-04.  Though 
the apparent domestic consumption increased by about  6,591 MT in 2003-04, the domestic industry did 
not get its share of such increase, on the other hand lost its market by about 3,069 MT.  The imports 
captured the entire increase as well as the domestic indus try’s share of market.  This reflects the surge 
in imports, replacing the domestic industry’s share in the apparent domestic consumption and the injury 
caused to the domestic industry on account of imports .  The injury on account of increased imports that 
too at low prices has directly and adversely affected th eir sales to the extent that some of their reputed 
customers who were purchasing large quantities from th em have even stopped buying from them.  The 
imports have steadily replaced their customer base and putting them to extreme hardship as customers 
are negotiating with them for prices which is far below their cost of production.  
 
13. In the Notice of Initiation issued by the Direct or General (Safeguards) it has been stated that 
imports of Starch and Manioc (Cassava, Tapioca) based Sago into India are mainly from Australia;  
Chile;  People’s Republic of China;  Finland;  France ;  Germany;  Hong Kong, China;  Italy;  Japan;  
Korea, RP;  Malaysia;  the Netherlands;  Thailand;  United States;  and Vietnam.  Imports of Starch 
have reportedly increased from 2455 MT in the year 2000-2001 to about 9800 MT in 2003-04.  Further 
it  has been stated that  imports of Tapioca & subs titutes prepared from starch in the form of Flakes, 
Grains, Pearls, siftings ,seeds or similar form s which was about 305 MT in 2000-01 increased to about 
2300 MT in the year 2003-04.  In this connection th ey have analysed the imports for the period 2003-04 
and observed that the imports are mainly emanating from Thailand and Vietnam.  These two countries have built up huge capacities.  They have traditiona lly been manufacturing animal feeds and tapioca 
chips used for alcohol industry.  It has been gathered that particularly Thailand has been diversifying its 
markets to reduce its dependence on the European Union which had important implications for the 
composition of its sales, with Flour and Starch gaini ng a growing share in exports.  It has also been 
stated in the Thai Tapioca Starch Association that its share in the world Tapioca market will continue 
due to their Government’s efforts to expand exports to new markets as well as maintaining the old ones.  
It was also observed that due to the BSE (Bovine Spongiform Encephalopathy)  scare in the European 
Union, the EU Countries have reduced their requirement s of starch based animal feed particularly from 
Thailand.  Thailand Government reportedly set up a Mission in 2002, to address the problems of 
Tapioca trade in EU market, which witnessed a downwar d trend for Thai animal feed.  Thai government 
also decided to explore new markets in Asia, as it wa nted to reduce its dependenc y on EU markets.  The 
Thai government constituted Trade Missions in 2002 comprising of high-ranking officials to address 
these issues.  Further it has also be en observed from the published journals of Thai Starch Association 
that due to strict adherence of certain internationa l quality specifications by developed countries, they 
have started exploring and targeti ng countries like India.  The increased imports of Tapioca Starch into 
our country particularly from Thailand are perhaps as a sequel to this development. It has also been 
observed that the Government of Thailand in their effo rts to compete with Vietnam, who is also a major 
producer and exporter of tapioca Starch has lowered th eir prices to capture new markets.  The imports at 
lower prices coupled with increased imports certain ly acts as a barrier and offer a very unfair 
competition to the domestic producers which need to be addressed by the Director General of 
Safeguards . 
 
14. There is no authentic study report available to indicate the exact quantum of demand for the 
product namely Starch.  They are presently operating at 16% to 17% of their capacity.  They together 
with the other domestic manufacturers are totally geared up to meet the entire domestic demand of the country.  The injury has been caused  mainly because of imports of Star ch.  With the state of the art 
technology and fully modernized plant they are fully g eared up to face competition, if it is fair, with a 
level playing field.  The price parity between the domestic prices and import prices has put the domestic 
market in an unenviable position.  By imposing sa feguard duty on imports of Starch, a level playing 
field will be created, thereby promoting a healthy competition for the industry.  G/SG/N/8/IND/14 
 Page 19 
 
 
 15. They have observed that even modified star ches are imported into India in large quantities 
which have been increasing year after year.  This ha s a direct and adverse impact on the domestic starch 
industry, as the off-take of starch by modified starch industries has been depleting, particularly during the last two years.  Further having successfully completed trial production of Modified Starches, they are unable to manufacture on commercial basis as Modified Starches is also being imported in large 
quantities that too at lower prices, which has discour aged them to venture into commercial production.  
The position got aggravated due to reduction in Customs duties on Modified Starches falling under 
Chapter Heading 3505 from a level 30% to 20% eff ective January 2004 onwards.  They have been 
supplying Tapioca Starch to Modified Starch manufacturers and due to the increased quantity of 
imports that too at low prices, these parties have reduced their purchases from them. 
 
16. They are competent and their have reposed gr eat faith on the quality and standards of Starch 
manufactured by them.  Many modified starch and food industries have been purchasing starch 
manufactured by them for years which reflects their commitment in maintaining strict quality parameters to the satisfaction of their customers.  
17. They have requested for a Safeguard Duty of  123% to be imposed over and above the existing 
tariff levels, which will go a long way in protec ting them from the onslaught of imports, thereby 
contributing better realizations which would help them and the Tapioca based Industry including 
cultivators .  
18. Their manufacturing plant has been set up with the Thai collaboration with a state of art 
technology and it is a new plant, fully mechanized  meeting the international quality standards and 
specifications.  Being a new plant any cost reducti on can only be achieved through better utilisation of 
capacities.  If a Safeguard Duty protection as sought fo r is provided, it will discourage imports at prices 
which are considerably low compared to their present cost of production, thereby customers reverting to 
them for their requirements.  This would help them  in better utilisation of capacities and reducing cost 
considerably.  However they have been making all e fforts in reducing their cost of production and for 
achieving better plant parameters.  Serious  attempts are being made by way of in house  Research and 
Developments to bring about optimum efficiency for better yield both in tuber produce and its starch content.  
19. They along with other Starch & Sago ma nufacturers in Tamilnadu and SAGOSERVE are  
closely associated with the efforts taken enhancing th e yield of Tapioca tubers and its Starch content, 
under the guidance of Central Tuber Crops Research Institute (CTCRI), Trivandrum and Tamilnadu 
Agricultural University ,Coimbatore, Tamil Nadu 
 20. They have set up their own Research & Developm ent division and continuous efforts are being 
made in various facets of tapioca cultivation, such  as trial plantation of Cassava Mosaic Disease (CMD) 
resistant tuber, improving farm techniques as per expe rt’s advice exploration and testing of new areas 
for tapioca plantation.  They have already achie ved significant success in tuber yield, which has 
improved from 26% in 2001-02 and 2002-03 to 28% in 2003-04.  21. As a measure to help the farming community, they have approached Indian Overseas Bank to 
provide crop loans to the farmers, under a tripartite arrangement with them.  The farmers can get loans 
on very reasonable rates and they are offering to take their produce.  This helps the Company also as 
raw material availability being assured, leading to a win-win situation for farmers and bank and 
company as well.   22. They had imported Tapioca Starch from Thailand in the year 2003-04 to the extent of 1216 MT 
mainly to retain their customer b ase and due to their inventory as th ey did not consider it prudent to 
manufacture at a high cost and supply to their customers.  
 G/SG/N/8/IND/14 
Page 20  
 
 (c)  Varalakshmi Starch Industries Limited, Salem
 
 
(a) They are engaged in the manufacture of Tapioca Starch falling under Chapter 1108, Modified 
Starches (Chapter 3505).  They are equipped with latest technology and machineries to meet the demand in the country both in terms of quality and quantity. 
 
(b) Their major customers have switched over to imports due to cheaper prices but are consuming 
their product alternatively. 
 
(c) The increased imports of Tapioca Starch and Modified Starches are posing a serious threat to 
their industry.  The imports of Starch and Modified Starches during the year 2002-03 and 2003-04 
against negligible quantity during the preceding years. 
 
(d) Due to lower prices of imports the customers tend to negotiate the domestic prices to match 
with the landed cost which becomes economically  unviable and adversely affects the farming 
community as well. 
 
(e) The impact of low priced imports has adversely affected their capacity utilization and many 
small units have closed down due to lack of mark et for their products.  The area under cultivation has 
declined by 40000 Hectares which has become ba rren causing environmental problems and resulted in 
large unemployment. 
 
(f) In the event of imposition of safeguard duties on Tapioca Starch, they would like to impress 
that the same maybe imposed at the same rates for Modified starches since the physical characteristics 
and the testing methods are the same and it is diffi cult to distinguish them with the naked eye unless 
they are subjected to chemical analysis.  (d) Bharat Starch Industries, New Delhi
 
 
(i) They established their manufacturing operations in 1937 and are leaders in manufacturing and 
marketing Modified Starches having specialis ed use in Paper and Textile industries. 
 
(ii) For manufacturing Modified Starches, Native star ch is the primary raw material.  Change in the 
cost of the primary raw material directly affects  the price competitiveness of the Modified Starches. 
 
(iii) They have requested for a level playing field for manufacturers of Modified Starch by keeping 
the effective rate of duty on Modified Starches on par or higher with Native starch.  This can off- set the 
Native starch cost advantage for imported products that  they would be enjoying in their own country.  If 
the import duty parity between the Modified Starch and native starch is not provided the manufacturers 
who have made considerable R&D work and investme nts would be thrown out of market by cheaper 
imports of Modified Starches.  
 
(iv) Modified Starch and Native Starch are products  which are directly linked to each other in terms 
of product cost, market competitiveness and should be  treated on par with each other.  In case the 
import duty on Modified Starch is lower than Native Starch it will open up the possibility of unscrupulous persons bringing in native starch as Modifi ed Starch as they are very similar in physical 
appearance. 
 
(e) Views of Farmers of Tamilnadu
 
 They fully support the levy of safeguard duty on imports of Starch; Manioc (Cassava, Tapioca) 
based Sago & Modified Starches and have requested  appropriate Safeguard Duties to be imposed 
immediately to save the farming community.  They have stated that the increased imports at lower  G/SG/N/8/IND/14 
 Page 21 
 
 
 prices have affected them adversely.  The area unde r cultivation of Tapioca h as been declining over a 
period because of increased imports and as a sequel, the realisation of farmers for their crops which is highly perishable has not been commensurate with the increase in cost of cultiva tion.  This has resulted 
in many of the farmers abandoning the cultivation whic h has thrown them out of employment leading to 
misery.  This would be evident from the table below: 
 
Year Area (ha) Production (MTs) 
2000-01 104782 4295529 
2001-02 108005 4153046 
2002-03 67951 2146534 
2003-04 (provisional) 65927 2373372 
 
 It may be observed that the area under cultiv ation which was 104,782 ha in 2000-01 increased 
to 108,005 ha in 2001-02, declined substantially to 67,951 ha in 2002-03 and further declined to 65,927 
ha in 2003-04.  This reduction in area under cultiv ation particularly in 2002-03 and thereafter 
correspond to the imports of Tapioca based Starch, Sago and Modified Starch into the country in 
substantial quantities, that too at lower prices.  Th ey understand that an estimated 18,000 MT to 20,000 
MT of Tapioca based products particularly Starch and Modified Starch has been imported into the 
country during the last one and a half years, which tr anslates to more than 1 lakh MT of Tapioca tubers.  
This in turn had its own adverse effect on the ar ea under Tapioca cultivation.  In the event of the 
domestic starch industry not being protected, it is ap prehended that more and more farmers will desist 
and abandon Tapioca cultivation which will have its  own serious consequences on the availability of 
tubers and lead to an agrarian disaster which n eeds to be addressed and avoided at all costs.  
 (f) SAGOSERVE, Salem
 
 
(i) Cassava or Tapioca was introduced to India during the later part of 18th Century.  In the World 
production of Tapioca, India’s share is about 6% .Other important Tapioca producing countries are 
Brazil;  Nigeria;  Zaire;  Thailand and Indonesia.  Tapioca is a crop of great economic importance, both 
as human food, animal feed as well as a raw material fo r industrial products.  It is considered to be the 
cheapest source of Carbohydrate amongst th e cereals, tubers and root crops. 
 
(ii) It is estimated that in India, tapioca is gr own over an area of 3.5 million Hectares with a 
production of over 60lakh tones of tube rs.  Salem in Tamilnadu has trad itionally been the land of Sago 
and Starch.  The Industry got a boost during the 2nd World War when imports from the Far East were 
not possible.  The Salem region offers good raw mate rial, cheap labour and good sunshine for a longer 
period of the day throughout the year, helping ma nufacturers to produce more tapioca based products 
e.g. Sago and starch and therefore this area is known as the Land of Sago/Starch, even at the international level.   
(iii) Prior to the formation of the Sagoserve, an I ndustrial Cooperative Serv ice Society in 1981 
under the Tamil Nadu Co-operative Societies Act, 1961,  the manufacturers of Starch and sago in Salem 
faced a lot of problems in marketing of their produ ce.  Merchants used to offer low prices for their 
goods and middlemen exploited the situation in th e absence of organized marketing and warehousing 
facilities. Sagoserve functions under the administrative control of Director of Industries and Commerce, 
Government of Tamil Nadu. 
 
(iv) The main objectives of Sagoserve is, inter-alia , to remove the middlemen from the scene of 
trade and to ensure better price for the tapioca finished products; to provide warehouse and credit 
facilities to Members; to improve tapioca cultiva tion and sago and starch industry and thereby the 
economic condition of tapioca cultivators and sago and starch manufacturers besides to improve 
productivity in the tapioca based industry and disse minate market intellig ence to its Members.  G/SG/N/8/IND/14 
Page 22  
 
 Sagoserve also acts as a catalyst to generate empl oyment in rural areas for skilled and unskilled labour 
and to strengthen the co-operative movement in the Sago sector.  (v) Members of Sagoserve send their finished goods fo r sale to society.  On receipt of goods, the 
Members are paid 50% of the value of the goods as advance and consignment is assigned a ‘Lot 
Number’.  Samples drawn from this consignment ar e put to ‘Tender Sale’ conducted daily except on 
Sundays and the days of State/National holidays.  After verification of sample of starch and sago for their quality, the traders quote their rates in secret  tender forms and the results are announced.  The 
Member-producer has the option of confirming the high est rate against his goods.  Once he confirms the 
sale he is paid another additional a dvance calculated with reference to the sales rate after retaining some 
amount for recoverable expenses.  The goods of the Members, till the confirmation of the sale and those 
of the buyers, till they take delivery, are stored in the Sagoserve godowns at a nominal godown rent.  
Besides, Sagoserve also executes orders directly  received from the consumers/end users against 100% 
payment from private merchants and Cooperative soci eties respectively on behalf of the members. 
 
(vi) Certain opposing interested parties are professing expertise in matters which they are barely 
conversant and claim knowledge more than the domestic  industry as to what ails it.  They have made 
certain assertions quoting dubious news and research re ports or quoted the written submissions of the 
domestic industry out of context.  (vii) The Tapioca based Starch and Sago industry has b een in good health since 1945.  The domestic 
industry has been successfully overcoming all its pr oblems for the last six decades.  The increased 
imports have unsettled this industry.  The present inju ry to the industry is entirely due to the increased 
imports.  They never sought any protection and their present request has been made since they have 
been genuinely affected and face a threat of serious  injury from cheap imports especially from Thailand 
and Vietnam. 
 
(viii) One of the opposing interested parties made a vague statement without quantifying that they 
require large quantities of Native Starch which the domestic manufacturers will be unable to meet and 
that variations in quality will affect their production.  There are more than hundred factories each with 
annual capacity of 2000 MTs and well equipped to pr oduce quality Starch to meet the entire demand of 
the country.  As Sagoserve aggregates the supplies received from various factories and Starch is not 
perishable, adequate supplies throughout the year is assured. 
 
(ix) Native Starch and Modified Starch are dissimilar chemically but they are not dissimilar 
physically. It is impossible to distinguish them by  visual examination and requires elaborate chemical 
analysis.  If safeguard duty is imposed on Native Starch there is a clear danger of it being imported 
under the garb of Modified Starch.  This is not an idle speculation but a scenario they think has already 
materialized when the rate of Customs duty on Modified Starches were brought down to 20% from 30%.  
E. FINDINGS
 
  I have carefully gone through the case records and the replies filed by the domestic producers, 
users/importers, exporters and e xporting governments.  Submissions made by various parties and the 
issues arising there-from are dealt with at appropriate places in the findings below.   
2. Product under Investigation
 
  
(a) Starches which are chemically carbohydrates are contained in the cells of many vegetable products.  The most important sources of starch are the cereal grains, certain lichens, certain tubers and roots and the pith of the Sago Palm.  Starches are white odourless powders composed of fine grains which crackle when rubbed between the fingers.  St arches are commercially pro cessed to give a wide  G/SG/N/8/IND/14 
 Page 23 
 
 
 range of products classified  under other headings e.g. modified starch, roasted soluble starch, dextrin, 
malto -dextrin, dextrose, glucose.  They are also u sed as such in a whole variety of industries especially 
the food, paper, paper conver ting and textile industries. 
 
(b) The products under investigation as per the No tice of initiation were Tapioca Starch, Sago (also 
commercially known as Sabudana in India) based on Ta pioca and Modified Starches.  There is no 
dispute about the domestically produced goods being a product alike the imported goods.  These 
products are classified under the Customs Tariff Ac t 1975 and under the Indian Trade Classification 
(ITC) based on the Harmonised Commodity Description as under:  
Tariff Item Commodity 
 1108  Starches 
11081100 Wheat Starch 
11081200 Maize (corn) Starch 
11081300 Potato Starch 
11081400 Manioc (cassava) Starch 
    
110819 Other: 
11081910 Sago 
11081990 Other 
    
19030000 Tapioca and substitutes therefore prepared from starch in 
the form of flakes, grains, pearls, siftings or in similar forms 
3505 Dextrins and other modified starches (for example, pre-
gelatinised or esterified starch es); Glues based on starches, 
or on Dextrins or other modified starches 
350510 Dextrins and other modified starches: 
35051010 Esterified starches 
35051090 Other 
35052000 Glues 
  
 These classifications under the Customs Tariff Act, 1975 and the ITC have been indicated for 
the purpose of convenience and in no way restricts the scope of the coverage of the products under investigation.  (c) The import duty (tariff and effective) on Ta pioca Starch falling under Chapter Heading 
11081400 / 11081910 / 11081990 during the last five years is as under: G/SG/N/8/IND/14 
Page 24  
 
  
 
Tariff Rate Effective Rate 
Year / 
Tariff Item 2000 - 
01 2001
- 02 2002 
- 03 2003
- 04 2004
- 05 2000-012001 
-02 2002
- 03 2003
- 04 2004
- 05 
 11081400 35% + 
10%SC
* 35% 30% 30% 50%35% +
10%SC* 35% 30% 30% 30%
 11081910 35% + 
10%SC
* 35% 30% 30% 50%35% + 
10%SC* 35% 30% 30% 30%
 11081990 35% + 
10%SC
* 35% 30% 30% 50%35% + 
10%SC* 35% 30% 30% 30%
   The import duty on Tapioca Starch which was 38.5% during the year 2000-01 was reduced to 
35% in 2001-02 and 30%in 2002-03 which continued till 2004-05 up to 7July 2004.  In the budget of 
2004-05, the basic standard rates of customs duty w as raised to 50 % for Tapioca Starch, however, the 
effective rate of duty remained unchanged at 30 %.  The Bound rate for Cassava/Tapioca Starch is 
100%.  
 
(d) The import duty (tariff and effective) on Sago (Sabudana) and Modified Starch falling under 
Chapter Heading 1903 and 3505 during the last five years is as under: 
 
 
Tariff Rate Effective Rate 
Year / 
Tariff 
Item 2000 - 
01 2001
- 02 2002 
- 03 2003
- 04 2004
- 05 2000-012001 
-02 2002
- 03 2003- 04 2004
- 05 
 19030000 35% + 
10%SC
* 35% 30% 30% 50%35% + 
10%SC* 35% 30% 30% 30%
 35051010  35% + 
10%SC
* 35% 30% 30% 50%35% + 
10%SC* 35% 30% 30%till 
8.1.2004 20% w.e.f.
9.1.2004 20%
 *Surcharge 
  
The Bound rate for Sago based on Tapioca ( Sabuda na) and Modified Starches are 100% and 150% 
respectively . 
 3. Manufacturing Process
: 
 
(a) Tapioca Starch and Sago( Sabudana)  
 
 Fresh tapioca tubers received in the factory is passed through the dry peel er to remove the soil 
and mud along with the outermost skin of the tubers.  The cleaned tubers are fed into a washer to wash 
the tubers.  The washed tubers are then fed into a chopper to get them chopped into small billets.  The 
chopped billets are rasped with high tensile steel rasper  blades into fine slurry by using fresh water.  
The slurry gets pumped into extractors where the star ch milk is separated from the pulp.  The starch 
milk is then passed through separators where it gets refined and concentrated.  The concentrated starch 
milk is pumped into de-hydrators.  The starch is separated from the starch milk and wet starch with 
residual moisture of about 35% is extracted out of th e de-hydrators.  The wet st arch is passed through  G/SG/N/8/IND/14 
 Page 25 
 
 
 disintegrators and gets powdered.  The powdered wet starch is fed into flash dryers by using hot air to 
dry the wet starch.  The dried starches coming out of the flash dryer with about 11-12% residual moisture is fed into sifters and packed in the ba gging section.  As regards Sago (Sabudana), the lump 
Starch in wet condition is powdered, converted to globules and roasted.  The roasted globules are dried, 
polished and packed.  (b) Modified Starch 
 
 For the manufacture of Modified Starch in genera l, the slurry is introduced into a well agitated 
tank.  After the necessary adjustments of pH factor and temperature, the reagents are added, sometimes 
over a period of several hours and the reaction is allowe d to proceed.  A sample is analyzed to ensure 
that the correct properties have been attained after which the reaction is terminated, if necessary, by pH 
change or other means.  The reacted starch is wa shed and concentrated in hydrocyclones or other 
systems after which it is dewatere d and dried in the normal way and pre-gelatinised. Some reactions 
require pH control using alkali.  Modified starches extend the range of functionalities of native starches 
and make it possible to use them in many more a pplications than would otherwise have been possible.   
Modified starches are value added products and ar e priced at a considerable premium over native 
starches .   
 
4. Preliminary objections  
 
(a) One of the issues most strongly contended by some of the opposing interested parties concern 
the maintainability of the proceedings under Section 8B  of the Customs Tariff Act, 1975.  The exporters 
have raised a preliminary objection as to the jurisdic tion of the Director General to initiate a safeguard 
investigation against imports of Starch, Sago (Sabudan a) and Modified Starch in the light of certain 
conditionalities imposed under the Customs Tariff Ac t, 1975.  The exporters/im porters/user industries 
argued on conditionalities imposed under Section 8B of  the Customs Tariff Act, 1975 read with the 
SGD Rules and contended that the investigation is contrary to the principles laid down in the said 
Section 8B of the said Act and the Rules.  It was st ated that the adequacy, accu racy and sufficiency of 
the evidence should have been examined before any investig ation is initiated.   
  (b) Both Indian law and the WTO Agreement on safeguards require a causal link between 
increased imports and serious injury or threat of seri ous injury.  A determination of serious injury or 
threat of serious injury shall not be made unless th e investigation demonstrates on the basis of objective 
evidence the existence of the causal link between the increased im ports of the product concerned and 
serious injury or threat thereof.  The investiga ting authority must establish a genuine and substantial 
relationship of cause and effect between the increased  imports and serious injury.  Any injury resulting 
from factors other than increased imports are not to be attributed to imports.  
 
(c) It has been averred that raw st arches and modified starches ar e not directly competitive with 
each other.  Modified starches are fundamentally diff erent from native raw starches.  Modified starches 
under Chapter 3505 in their various forms are physically and functionally distinct from the classes of native starch that fall under Chapter 1108.  The term like article  is generally understood to refer to 
products that are physically identical and the term directly competing  articles refers to products that 
are physically interchangeable.  Modified starches do not meet the statutory standard of being identical 
or alike in all respects to native starches and shoul d be treated as separate ar ticles for assessment of 
injury parameters.  Their understanding is that th e Tamilnadu cooperatives that have spearheaded the 
safeguard investigation do not produce Modified Starch of any variety in meaningful quantities to meet 
the demand of specialty products of very high quality .  They have also urged to treat Manioc based 
Sago under Chapter 1903 as a separate article and to exclude the increase in imports for purposes of 
determining whether the Indian Starch industry has b een injured by imports within the meaning of the 
safeguard law.  They have averred that Manioc based Sago generally in  the form of flakes, pearls or 
grains is to be more properly viewed as a downstream product prepared from Starch. G/SG/N/8/IND/14 
Page 26  
 
  
(d) It has been averred that the material inform ation made available by a few domestic Modified 
Starch manufacturers is grossly inadequate and insu fficient to comprehend the defined parameters for 
considering imposition of safeguard measures on the said items by the Director General. 
 
(e) It has also been stated that Section 8B of the Customs Tariff Act, 1975 defines “domestic 
industry” to mean the producers (a) as a whole of the lik e or directly competitive article in India;  or (b) 
whose collective output of the like article or a directly competitive article in India constitutes a major 
share of the total production of the said article in India.  The domestic Modified Starch manufacturers 
who have sought safeguard relief app ear to have not placed sufficient material information to suggest 
that they account for the major proportion of the domestic production of Modified Starch in the country 
during the period under consideration by the Director General.  
5. Analysis of preliminary objectio ns and determination of product under 
 consideration  
 (a) It is considered appropriate to deal with this  preliminary issue first to determine the product 
which needs to be considered in these findings.     The main issues referred for consideration in the proceeding are whether  
 (i) the notice of initiation has been correctly issued; and  
  (ii) Sago based on Tapioca and Modified Starches are like articles  and/or directly 
competing articles  vis-à-vis Tapioca Starch. 
 
(b) In this connection what the Director General has proposed to do by issuing the Notice dated 
7 July 2004 is to start this process of investigati on and not to ‘apply or extend’ a safeguard measure.  
The Director General under Rule 4 of the Customs Tariff (Identification and Assessment of Safeguard 
Duty) Rules, 1997 is entrusted with making recomm endation regarding impositi on of a provisional or 
final safeguard duty.  The safeguard duty, however, may be applied only by the Central Government.  
 
(c) It is observed that the initiation of safeguard i nvestigation in the present case was notified to the 
WTO Committee on Safeguards and it meets the requirements.   Therefore, it is held that the 
investigation in the present case h as been initiated in accordance with  the provisions of the Indian 
safeguard law which reflect the relevant WTO provi sions and the requirements have been fully met 
with and the notice of initiati on has been correctly issued.  
 
(d) With regard to the submissions made by th e opposing interested parties that the products 
namely Sago based on Tapioca and Modified Starches vis-à-vis Tapioca Starch under investigation are 
not like or directly competing articles, it is fully su pported by the principles laid down in the Agreement 
on Safeguards and the Safeguard Duty Rules.  The Indian Customs Tariff Act, 1975 recognizes Starch, 
Modified Starch and Sago based on Manioc Cassava (Sa budana) as distinct items.  This is also borne by 
their individual physical, marketing and usage ch aracteristics.  Classification of a product under the 
Customs Tariff Act 1975 is not a mere academic exerci se.  Its main purpose is determining applicability 
of rate of duty.  The purpose is not to enc ourage circumvention and defeat a WTO compatible 
contingency trade protection measure.  At the same tim e care needs to be taken that an item that should 
be charged to safeguard duties must not escape the incidence. 
  G/SG/N/8/IND/14 
 Page 27 
 
 
 (e)  Though a number of domestic manufacturers of Modified Starch were addressed to send their 
response to the notice of initiation but only few responded.  Besides, the reasons for  excluding Modified 
Starch from the purview of the present investigations, it may be mentioned in particular that the details 
furnished by a few selected domestic manufacturers were  not found verifiable a nd no substantial details 
in respect of the domestic industry as a whole has b een placed before me to arrive at any logical 
conclusion.  These details namely Installed Capacity;  Production;  Sales levels and realizations etc. for 
the industry as a whole are indeed important and are an explicit criterion for determination of injury 
parameters due to increased imports, if any, fo r quantifying and recommendi ng imposition of Safeguard 
duty or otherwise.  The Director General under the Sa feguard Duty Rules is required to record a finding 
that imports of such article into India causes injury.  If importing an article does not or is not capable of 
causing any injury to the domestic industry, imposi tion of safeguard duty is not warranted as it only 
increases the cost to the Indian importers without a ffording any protection to the domestic industry.  I 
am constrained to observe that Modified Starch ma nufacturers have not passed the test of scrutiny for 
imposition of safeguard duty.  I am also not inclined  to pass any findings on any other matter which has 
been averred and contested by various interested  parties including the domestic manufacturers in 
relation to Modified Starch. 
 
(f) As regards Sago based on Tapioca (Sabudana) is concerned , the details of imports into India as 
reflected in the DGCIS data was got verified th rough the Customs for the year 2003-04 and 2004-05 
(June).  The imports of Sago based on Tapioca (Sabudana) reflected in DGCIS during 2003-04 was 
1934.092 MTs valued at Rs. 163.77 Lakhs.  This pe rhaps included a quantity of 562 MTs of Tapioca 
Starch imported through Tuticorin Port whic h was wrongly classified under 19030000.  However 
reports received form other Cust oms formations revealed that onl y negligible quantity (about 330MTs) 
has been imported into the country to have any meaningful adverse impact on the domestic industry during 2003-04.  It is also pertinent to mention he re that during year 2002-03 only a meagre quantity of 
50 Kgs appears to have been imported as per DGCIS data. 
(g) The present investigation, therefore, covers  only Tapioca Starch falling under Chapter 
Heading 1108 of the Customs Tariff Act, 1975 irrespective of its classification under subheading 
11081400 or 11081910 or 11081990 for the reasons dealt with elsewhere in these findings .  Any 
reference to Starch in these findings should be unde rstood as Tapioca Starch, unless specifically started 
otherwise. 
 
(h) The opposing interested parties have questioned the domestically produced Tapioca Starch 
being a product alike to the imported Tapioca Starch on the grounds of quality and physical characteristics.  They have stated that the quality of Tapioca Starch manufactured domestically was not up to the mark and that the imported Starch was of  a better quality for manufacture of down stream 
items. 
 
(i) This is however a vague and unsubstantiated a llegation. No details as to how the domestically 
produced Tapioca Starch suffers in quality have been furnished.  In this regard, the domestic producers 
have claimed that their product conforms to interna tional standards set for Tapioca Starch.  A copy of 
characteristics of Tapioca Starch manufactured domestically and the imported Tapioca Starch was also produced by the domestic producers which revealed that their product is fully compatible with the 
imported Tapioca Starch with regard to various qua lity parameters.  The domestic producers are in the 
business of Tapioca Starch for the last sixty years and Tapioca Starch manufactured by them undergoes 
stringent quality checks before it is sent to the cu stomers. Samples are tested at every stage of 
production.  They have been supplying Tapioca Starch to number of well known multi national 
companies including food industry and to the pharmaceutical industry who are extremely quality 
conscious.  Further, a mere difference in quality doe s not ipso-facto take away a product out of the 
scope of ‘like or directly competitive products’  G/SG/N/8/IND/14 
Page 28  
 
  In this connection the users are consuming the domestic Tapioca Starch and the imported 
Tapioca Starch interchangeably w ithout making any appreciable modification in their plant process.  
The two are technically and commercially substitutable.   It was observed that domestic Tapioca Starch 
and the imported Tapioca Starch have the same end u se characteristics and they are like articles within 
the meaning of the Safeguard Duty Rules for the purpose of determination of injury.  
 
6. Domestic Industry:  
 
 The present investigation largely arises out of  a representation addressed to the Ministry of 
Finance by the Farmers & Farmers Association of Tamil Nadu and Tamilnadu Sago and Starch 
Manufacturers Welfare Association, Salem (TASSM A) requesting imposition of Safeguard Duty on 
Starch, Modified Starch and Tapioca based Sago (Sa budana).  It was, inter alia, requested by these 
Associations that the import duty on Sago and Starch be raised from 30% to 100% and on Modified Starch from 20% to 150% being the bound rate of duty respectively under the WTO Schedule of Concessions agreed to by India.  It was stated by  the Associations that the landed cost of imported 
Starch is much lower than the domestically produced  Starch resulting in large imports taking place into 
the Country affecting the domestic industry besides the farmers cultivating Tapioca particularly in 
Tamil Nadu and other Southern States.  After consid eration of various parameters and the increasing  
trend in imports of Starch, Modified Starches and Manioc (Cassava, Tapioca) based Sago into India 
during the last three years have cau sed / threatened to cause serious in jury to the domestic producers of 
Starch, Modified Starches and Manioc (Cassava, Ta pioca) based Sago( Sabudana), it was decided to 
initiate the investigation under th e Customs Tariff (Identification a nd Assessment of Safeguard Duty) 
Rules, 1997 (SGD Rules) and accordingly a Notice of Initiation was issued on 7
th July 2004 .  
 
 Section 8B of the Customs Tariff Act, 1975 defines ‘domestic industry’ to  mean  the 
producers – 
 
 (a)  as a whole of the like article or a directly competitive article in India;  or  (b)  whose collective output of the like articl e or a directly competitive article in India 
constitutes a major share of the total pro duction of the said article in India. 
 
 As per the evidence and facts available, it is he ld that Modified Starch and Sago are outside the 
purview of these findings.  There are about 700 St arch & Sago manufacturers, of which 448 are active 
units spread over eight districts in Tamilnadu who are members of Tamilnadu Sago and Starch 
Manufacturers Welfare Association,  Salem (TASSMA) and account for more than 70% of the total 
installed capacity for Tapioca Starch and 75% of Tapioca Starch production in the Country during 2003-04, their representation has been treated to have  been made on behalf of the domestic industry.  
They have also been supported by other manufacturers  of Tapioca Starch in the Medium sector namely 
Spac Tapioca Products (India) Ltd., Erode and Varalakshmi Starch Industries Ltd Salem. 
 
7. Verification and quantification of imports 
 
 (a) In the Notice of initiation reliance was placed on import details as per DGCIS, Kolkatta. Since, 
no break up of imports was readily available and due to diversity in classification of the product i.e.  
Tapioca Starch at different ports noticed as bei ng cleared by importers under different tariff sub 
headings under Chapter 1108, it was, inter alia , taken that imports of Starch increased from 2455 MTs 
in the year 2000-01 to about 9800 MTs in 2003-04.  The import data as compiled by the DGCIS appeared to be not very accurately reflecting the position of imports and therefore additional reliance 
has been placed on the details furnished by the domes tic industry and reconciliations carried out by this 
Directorate from Customs.  (b) Import data from various Custom  Houses for the period 2003-04 and 2004-05 (up-to June 2004) 
in respect of the items under investigation w as compiled for the purpose of ascertaining the exact  G/SG/N/8/IND/14 
 Page 29 
 
 
 quantum of imports particularly Tapioca Starch and Sago ( based on Tapioca).  Besides it was observed 
that the DGCIS data classified Tapioca St arch under the heading 11081400, 11081910 and under 
11081990 and was not correctly reflecting the imports ex clusively of Tapioca Star ch.  It appeared that 
there have been certain omissions thus due adjustme nts was required to be made.  However, only such 
imports that are clearly proven as Tapioca Starch   under the heading 11081400, 11081910 and under 
11081990 have been taken in to account for the purpose of compilation and due adjustments have been 
made in the import data based on the description and c ountry of origin of the goods furnished in Bill of 
Entry.   (c) On the basis of data so compiled as mentioned below, it was observed that during 2003-04, a 
quantity of 11100 MTs of Tapioca Starch has been  imported mainly from Thailand (7372 MTs) and 
Vietnam (3728 MTs) and has been taken as the basis fo r working out injury parameters.  It was also 
noticed that a quantity of about 4139 MTs of Tapioca Starch valued at Rs. 378.90 Lakhs  appears to have been imported during 2004-05 (June ).  A quantity of 195 MTs and a quantity of 3944 MTs 
appears to have been imported from Vietnam and Tha iland respectively during the year 2004-05 (June).  
Imports from other countries have not been noticed  during the period 2003-04 and 2004-05 (June). 
 
MONTH VIETNAM THAILAND TOTAL 
2003-04 
April  112.000 112.000 
May  156.004 156.004 
June 19.000 38.000 57.000 
July 628.900 628.900 
August 190.000 649.370 839.370 
September 1317.900 1317.900 
October 2546.760 688.750 3235.510 
November 96.500 1296.180 1392.680 
December 292.780 1285.500 1578.280 
January 194.388 55.550 249.938 
February 388.000 689.000 1077.000 
March 455.000 455.000 
Total 3727.428 7372.154 11100.000 
2004-05 
April 195.390 3036.000 3231.390 
May 907.500 907.500 
June  
Total 195.390 3943.500 4138.890 
 
The imports of Tapioca Starch for the period 2001- 02 and 2002-03 as per DGCIS data was 428MT and 
1072 MT respectively.  The month-wise quantum of  imports during the year 2003-04 and 2004-05 (up G/SG/N/8/IND/14 
Page 30  
 
 to June, 2004) as per reports receiv ed from the customs formations a nd the reconciliation carried out by 
this Directorate in respect of Tapioca Starch is as under:  
2003-04 2004-05 
Month Quantity Value Value 
per MT Quantity Value Value 
per MT 
April 112.000 1,015,758 9,069 3231.390 29530426 9139
May  156.004 1,314,649 8,427 907.500 8360418 9212
June  57.000 373,593 6,554 --  -
1st Quarter 325.004 2,704,000 8,320 4138.890 37890844 9155
July 628.900 4,034,369 6,415
August 839.370 6,761,236 8,055
September 1,317.900 11,021,268 8,363
2nd Quarter 2,786.170 21,816,873 7,830
October 3,235.510 11,385,560 3,519
November 1,392.680 10,986,813 7,889
December 1,578.280 13,345,044 8,455
3rd Quarter 6,206.470 35,717,417 5,755
January 249.938 2,243,757 8,977
February 1,077.000 8,826,457 8,195
March 455.000 3,931,118 8,640
4th Quarter 1,781.938 15,001,332 8,419
Total 11,099.582 75,239,622 6,779The imports during 2004-05 taking 
the imports made  during the 1st 
quarter, on an annualized basis, is expected to be around 16555MTs   
 
 It may be observed that the imports of Tapioca Starch during the year 2001-02 which was 
428 MTs increased to 11100 MTs in 2003-04 and during 2004-05 on an annualized basis to 16555 MTs. 
The imports during the 1st Quarter of 2003-04 were only 325 MTs compared to 4139 MTs in the 
1st Quarter of 2004-05 registering a phenomenal increase.  
 
(d) Some of the interested parties have raised an  issue in the context of increased imports.  They 
appear to suggest considering only excess imports  i.e. excess of imports over shortage (supply 
constraints) in domestic demand a nd domestic production to determine whether imports have increased 
in absolute terms .  In the context of increased imports, Rule 2(c) of the Customs Tariff (Identification 
and Assessment of Safeguard Duty) Rules, 1997 defi nes ‘increased quantity’ to include increase in 
imports whether in absolute terms or relative to domestic production.  The two phrases ‘in absolute 
terms’ or ‘relative to domestic production’ have been  used in juxtaposition and derive their meanings 
from a plain reading of the definition itself.  The words ‘in absolute terms’ clearly refer to an increase in 
imports in absolute terms e.g. an increase in quantity/number of units.  The law does not require 
excess of imports, as has been argued by some of  the opposing interested parties to be considered 
for determination whether imports have increased in absolute terms .  In fact, it would be 
impractical to imagine, in the wake of imports allo wed without any restrictions, that one should like to 
import more than what is required i.e. ‘excess imports’ and build up inventory.  What the law, therefore, 
requires is to consider imports in absolute term s and relative to domestic production.  Whether the 
imports have entered because these were needed to meet the demand may be relevant for determination 
of injury caused by such imports but it is not rele vant for the determination of the fact of increased 
imports.   G/SG/N/8/IND/14 
 Page 31 
 
 
 (e) It may be observed from the Table below that the imports of Tapioca Starch during the year 
2001-02 which was 428MTs increased to 11100 MTs in 2003-04.  The imports as a percentage of domestic production of Tapioca Starch registered an increase from 0.32% in 2001-02 to 13.84% in 
2003-04.  Thus the imports have increased both in absolute terms as well as compared to domestic 
production .  
 
Year Domestic production 
(MTs) Imports 
(MTs) Imports as percentage of 
domestic production 
2001-02 132390 428 0.32% 
2002-03 77352 1072 1.39% 
2003-04 80174 11100 13.84% 
 
8.  Unforeseen development and effect of obligation under WTO  
 (a) An issue has been raised by some parties that it is necessary to evaluate whether the increase is 
as a result of unforeseen developments  and of the effect of obligations incurred by India under the 
GATT .  It has been stated that the increase in imports must be the effect of obligation incurred under the 
WTO and since the import duty on Tapioca Starch  is much below the bound levels, the increased 
imports can not be considered to be a result of any ‘obligation incurred’ in respect of Tapioca Starch.  
This requirement, however, emanates from Article XI X of GATT 1994 and is in relation to suspension 
of the obligation in whole or in part or withdrawal or modification of the concession.    (b) As regard the obligations incurred by India in  respect of Tapioca Starch it is appropriate to 
mention that Tapioca Starch is one of the products in  respect of which India has, inter alia, incurred the 
obligation of both providing tariff concessions by including it in its Schedule of Concession and 
unrestricted importability i.e. allowing imports of Ta pioca Starch without any quantitative restrictions. 
 (c) In this connection, the term ‘unforeseen development’ should be interpreted to mean 
developments occurring after the negotiation of the relevant tariff concession which it would not be 
reasonable to expect that the negotiators of the country making the concession could and should have 
foreseen at the time when the concession was negotiated.  In regard to the term “unforeseen 
developments” both in the Argentina Footwear case and in Korean Dairy Products case the 
Appellate Body observed that:   “To determine the meaning of the clause “as a result of unforeseen developments and of the 
effect of the obligations incurred by a Member under this Agreement, including tariff 
concessions…” in sub-paragraph (a) of Article XIX:1, we must examine these words in their ordinary meaning, in their context and in light of the object and purpose of Article XIX.  We look 
first to the ordinary meaning of these words.  As to the meaning of “unforeseen developments”, we 
note that the dictionary definition of “unfor eseen”, particularly as it relates to the word 
“developments”, is synonymous with “unexpected”.  “Unforeseeable”, on the other hand, is defined 
in the dictionaries as meaning “unpredictable”  or “incapable of be ing foreseen, foretold or 
anticipated” (emphasis added).  Thus, it seems to us  that the ordinary meaning of the phrase “as a 
result of unforeseen developments” requires that the developments, which led to a product being imported in such increased quantities and under such conditions as to cause or threaten to cause 
serious injury to domestic producers must have been “unexpected”.  With respect to the phrase “of 
the effect of the obligations incurred by a Member under this Agreement, including tariff 
concessions”, we believe that this phrase simply means that it must be demonstrated, as a matter of fact, that the importing Member has incurred obli gations under the GATT 1994, including tariff 
concessions (emphasis added).  Here, we note th at the Schedules annexed to the GATT 1994 are 
made an integral par t of Part-I of that Agreement, pursuant to paragraph 7 of Ar ticle II of the GATT G/SG/N/8/IND/14 
Page 32  
 
 1994.  Therefore, any concession or commitment in a Member’s Schedule is subject to the 
obligations in Article II of the GATT 1994.”  
 The Appellate Body has thus distinguished between ‘unforeseen’ and ‘unforeseeable’.  They 
have held ‘unforeseen developments’ to be syno nymous with ‘unexpected developments’.   
 
(d) As regards the developments that have resulted in increased imports, the domestic 
producers have averred that due to stringent Eu ropean Environmental regulations the Thai 
Exporters have now started looking & targeting to ma rket their surplus production.  Besides, it is 
a matter of fact that while the domestic industry has been opened to face competition from global 
producers, it lacks provision of international co mpetitive environment for the factors responsible 
for production at internationally competitive pr ices.  The surge in imports and apparent injury 
thereof is clearly a result of all these unexpected developments . 
 (e) Thailand has  traditionally been manufacturing animal f eeds and tapioca chips used for alcohol 
industry.  It has been gathered from evidence made  available that particularly Thailand has been 
diversifying its markets to reduce its dependen ce on the European Union which had important 
implications for the composition of its sales, with Fl our and Starch gaining a growing share in exports.  
It has also been stated in the report of Thai Tapi oca Starch Association that  its share in the world 
Tapioca market will continue due to their Governme nt’s efforts to expand exports to new markets as 
well as maintaining the old ones.  It was also observed that due to the BSE  (Bovine Spongiform 
Encephalopathy)  scare in the European Union, the EU Countries have reduced their requirements of 
starch based animal feed particularly from Thailand.  Thailand Government reportedly set up a Mission in 2002, to address the problems in EU market, wh ich witnessed a downward trend for Thai animal 
feed.  Thai government also decided to explore new markets in Asia, as it wanted to reduce its 
dependency on EU markets.  The Thai government constituted Trade Missions in 2002 comprising of 
high-ranking officials to address these issues.  Furt her it has also been observed from the published 
journals of Thai Starch Association that due to  strict adherence of certain international quality 
specifications by developed countries, they have st arted exploring and targeting countries like India.  
The increased imports of Tapioca Starch into India country particularly from Thailand are perhaps as a 
sequel to this development.  It has also been obser ved that the Government of Thailand in their efforts 
to compete with Vietnam, who is also a major, producer and exporter of tapioca Starch has lowered 
their prices to capture new markets.  It has been stated by the Thai Ta pioca Starch Association that their 
estimated total theoretical capacity was  more th an 4 Million Tonnes in 2003 and expect that the 
capacity will be enhanced by 7-8% in 2004.  
  
(f) A study commissioned by the FAO on the global Cassav a end uses and current market situation 
and recommendations reveals that the US and the EC  have highly protected import (and subsidized 
export) markets.  Thai Cassava pellet imports to the EC continued to decrease since the late 1980s.  
 (g) The imports of Tapioca based Starch which was insignificant till about 2001-02, witnessed a sudden, sharp and significant rise in 2002-03 and became  more prominent in 2003-04, that too at very 
low prices.  While the imports of Starch were earlie r noticed to be emanating from number of countries, 
but during 2003-04, it was observed that the imports we re mainly from Thailand and Vietnam.  One of 
the reasons for such imports into India from th ese two countries was due to large surplus capacities 
available with them and certain conditionality im posed on their products by developed countries, 
particularly the European Union.  
 
(h) The reduction in Customs Tariff triggered an in crease in the imports of Tapioca Starch.  The 
prices offered by the exporters are significantly lo w compared to the prices at which the domestic 
industry is capable of selling the subject goods in the market.  The exporters have targeted prime 
markets of the domestic industry and have already cap tured significant share of organized textile sector. 
  G/SG/N/8/IND/14 
 Page 33 
 
 
  In view of the above analysis, it is observed that Tapioca Starch has been imported into 
India in increased quantities.  The imports have  increased both in absolute terms as well as 
compared to domestic production, particularly during 2001-02 to 2003-04, which is the period 
that reflects more realistically on the current status  of the domestic Tapioca Starch industry.  The 
imports have increased as a result of unexpected developments and of the effect of obligations 
incurred by India . 
 
9. Injury analysis  
 
(a) It has been argued by some parties that it is not adequate that imports must be increased, but the 
imports must also be made under such  conditions so as to cause or threat en to cause serious injury to the 
domestic industry.  In this connection, Clause 6(c)  of Section 8B of the Customs Tariff Act, 1975, 
defines ‘serious injury’ to mean an injury causing significant overall impairment in the position of a 
domestic industry and Sub-clause (d) defines ‘threat of  serious injury’ to mean a clear and imminent 
danger of serious injury.  Further in determining wh ether increased imports have caused or threatening 
to cause serious injury to a domestic industry, th e Annex to the Safeguard Duty Rules requires the 
Director General to evaluate all relevant factors of  an objective and quantifiable nature having a bearing 
on the situation of that industry, in particular, the rate and amount of increase in imports of the article 
concerned in absolute and relative terms, the share of the domestic market taken by increased imports, 
changes in the level of sales, production, produc tivity, capacity utilisation, profits and losses and 
employment.  
 
    An analysis of various factors indicates that the domestic industry has suffered a significant 
overall impairment as discussed below:   
(i) Production :  The Table below indicates the figures of domestic production and imports of 
Tapioca Starch for the period 2001-02 to 2003-04 
 
Year Domestic production
(MT) Imports 
(MT) Imports as percentage of 
domestic production 
2001-02 132390 428 0.32% 
2002-03 77352 1072 1.39% 
2003-04 80174 11100 13.84% 
  It is observed from the data tabulated above that the imports which were 428 MTs in 2001-02 
increased to 1072 MTs in 2002-03 but increased thereafter to 11100 MTs in 2003-04 and is anticipated 
to increase to 16555 MTs in 2004-05 on an annualized b asis.  As compared to domestic production, the 
imports were almost negligible about 0.32% in2001-02, increased to 1.39% in 2002-03 but increased 
significantly to 13.84% in 2003-04.  It is also observe d that the imports as a percentage compared to the 
average domestic production of 96639 MTs during the period which stood at 0.44% in 2001-02 
increased to about 11.48% in 2003-04 in 2003-04. 
 
(ii) Capacity Utilisation : 
Year Capacity (MT) Production (MT) Capacity Utilisation 
2001-02 215654 132390 61.39% 
2002-03 220012 77352 35.15% 
2003-04 213650 80174 37.53% 
 G/SG/N/8/IND/14 
Page 34  
 
  It may be observed from the above table that keeping in line with the production, the capacity 
utilisation by the domestic producers has also come down in 2003-04 compared to 2001-02, though the 
capacity utilisation improved marginally during 2003-04 vis-à-vis 2002-03.  (iii)  Sales:   The Table below gives the domestic sales figures of the domestic producers (including 
captive consumptions and sales in the domestic ma rket on deemed export basis) for the period 2001-02 
to 2003-04.  It would be seen from the Table that the domestic producers achieved domestic sales (including captive consumption and sales on deemed export basis) of 139719 MTs in 2001-02 which 
declined to 96526 MTs in 2002-03 and further declined to 93457 MTs in 2003-04.   
 
Year Domestic 
Sales Imports Total Domestic 
Consumption Imports as a % 
of Domestic 
Consumption % of Share of Domesti
c
Sales to Domestic 
Consumption 
2001-02   139,719        428          140,147  0.30% 99.70 % 
2002-03      96,526     1,072            97,598  1.10% 98.90% 
2003-04      93,457  11100         104,557  10.61% 89.39% 
 
(iv)  Stocks: Even at drastically reduced level of produc tion, the stocks have accumulated to 40757 
MTs at the end of March 2004 which is almost 51% of  the production of Tapioca Starch during the year 
2003-04.  Analysis of the stock position carried out reveal ed  that the ratio of inventory to sales for the 
industry as a whole which was about 58% during 2001-02,  registered a marginal  increase to about 60% 
in 2002-03 and showed a decline to 44% during 2003-04.  
 
Year Opening 
Stock Production Total Sales Closing 
Stock 
2001-02 87700 132390 220090 139719 80371 
2002-03 77104 77352 154456 96526 57930 
2003-04 54040 80174 134214 93457 40575 
  (v)  Employment: The domestic Tapioca Starch produ cers have submitted that talented, 
experienced and contributing employees have started resigning from the services of the companies thereby leading to irreparable loss to the knowledge pool  and skills inventory of the domestic industry.  
They are also facing difficulties in attracting new recr uits as they see lack of growth prospects in the 
limping Starch industry.  In this regard, it is ob served that the number of employees working in the 
domestic industry declined from 12346 in 2001-02 to11040 in 2003-04.  
 (vi) Productivity:  It is observed that the domestic industry has lost production and obviously lost 
productivity.  The quantum of production per employ ee engaged by the domestic industry was observed 
to have declined from 23 MTs in 2001-02 to 17 MT s in 2003-04 that is they suffered a loss in 
productivity of about 27% . 
 (vii) Profitability:   Certain interested parties have claime d that the domestic producers made profits 
and as they have made profits in the past, it can hardly  be held that the petitioners have suffered injury.  
As regards their argument concerning injury in th e wake of past profits, it is observed that for 
determination of injury, various f actors have to be evaluated in an objective manner.  The reduction in 
net realisation has had serious effect on profitabilit y of the domestic industry.  The domestic producers’ 
profitability has been fast dwindling due to the ad verse impact of increased imports at low prices.  
Number of units are operating at loss and witnessing th eir margins falling drastically and several others  G/SG/N/8/IND/14 
 Page 35 
 
 
 have closed.  It appears that the domestic industry is suffering a significant overall impairment.  It has 
been observed, as would be evident from the Tabl e below, that the domestic manufacturers dropped 
their prices to match the landed cost of imports thereby causing severe injury to them.  The data 
furnished by the domestic industry for the period 2001- 02 to 2003-04 reveals that due to the depressed 
market condition caused by surge in imports of Tapi oca Starch, as many as 310 units were operating at 
meagre margins of less than 5%.  There are just 19 units making profits betw een 5% and 10% and the 
number of units that were operating at margins a bove 10% was just 14 on the capital employed.  The 
number of units which closed down during 2003-04 was 77 as compared to 41 in 2002-03.  
No. of Units 
Year 
  Less than 5% More than  5% & less than  10% More than 10% Units closed 
2001-02 310 20 10 56 
2002-03 306 25 18 41 
2003-04 310 19 14 77 
 
(viii ) Surplus Capacity set up abroad:  It has been averred that surp lus capacities exist in certain 
exporting countries.  To maximize their utilization of their augmented capacities and in view of 
favourable business environment in which they oper ate they target the Indian market for selling 
additional quantities at prices detrimental to the do mestic industry. Indian import parcels being small 
are transacted on spot basis and very often their prices are found to be significantly lower than the 
contract prices.  In a falling price regime domestic prices are fixed based on expected landed price 
parity.  Obviously the domestic prices suffer till the prices adjust to a reasonable level and remain in 
force for some time with steadiness.  It has been observed that the do mestic producers are also facing a 
threat of further serious injury to them from larg e capacity plants set up closer to India who have access 
to raw materials at prices much lower than India . 
 
(ix)  Distress Prices 
 
 The domestic industry has stated that they sell Tapioca Starch in the domestic market keeping 
in view the landed price parity and that due to declin e in import price, they were forced to reduce their 
selling prices resulting into financial losses to them.  It  is a matter of fact that domestic producers have 
been selling Tapioca Starch at prices much below th eir cost, resulting in financial losses to them.  
Tapioca Starch is importable into India without any quantitative restrictions.  As such, the landed price 
of imported Tapioca Starch governs the domestic ma rket price since it provides the comparative bench 
mark for the buyers to make their buying decisions.  
 It was observed from the details made available by Customs that there has been a substantial 
depression in prices (c.i.f.) of imports of Tapi oca Starch during 2003-04, from Rs 9069/MT in 
April 2003 to Rs. 3519/MT in October 2003 i.e. decline by about 61%.  However, the CIF price of Tapioca Starch which was Rs 3519PMT in Octobe r 2003 registered an increase to Rs. 8640 PMT in 
March 2004.  But when compared to the price of Rs. 9069 in April 2003 it still reveals a drop by about 
5%.  The domestic manufacturers in an effort to re tain their market share have been reducing their 
prices of Tapioca Starch.  The average domestic selling prices and the CIF price of imports of Tapioca Starch for the twelve-month period beginning Augus t 2003 to June 2004 was as under revealing that the 
domestic prices of Starch have been decreasing. 
 G/SG/N/8/IND/14 
Page 36  
 
  
(x) Certain parties have argued that price is not an important factor in the injury analysis in 
safeguard cases.  This is, however, not tenable.  In fact, price at which the goods are sold in the 
domestic market is one of the most important factors having a bearing on the injury suffered by it.  It is 
amply clear from a plain reading of this Section 8B that conditions under which the increased imports 
take place needs to be investigated for imposition of  safeguard duty and, therefore, price at which 
imports entered into India needs surely to be looked in to as price is one of the most important factor that 
needs consideration in taking a decision to source mate rial. In determination of serious injury or threat 
thereof, the law requires an examination of change in level of sales, profitability etc. of the domestic 
producers.  These factors undoubtedly depend upon the pr ices of competing products and in that context 
import prices do become relevant and require an ex amination, especially to assess their effect on the 
domestic situation.  Depression in national prices is an  important indicator of the market disruption and 
as a sequel thereof the injury suffered by the domestic producer.  The depressed prices results in loss of 
market share for the domestic producers and affect th eir profitability.  It is also observed that the 
domestic producers have not asked for banning imports  but have asked only for a temporary relief. 
 
(xi) Some opposing parties claimed and suggested that Starch industry at large has been passing 
through a recessionary trend particularly in Thailand and the Indian Industry has also felt its impact.  
The down turn in business and prices is, therefore, not  peculiar to India.  This argument, however, does 
not appear to be borne out on facts.  The depressed c ondition of domestic starch industry is not due to 
lack of domestic demand or due to general recession,  if any, in the Starch Industry but due to the 
increased imports at cheaper prices.  (xii) Some of the parties have also claimed that the cause of injury to th e domestic Tapioca Starch 
industry was not increased imports as the imports were in miniscule, insignificant quantities and were 
necessitated to meet the gap between domestic supply and domestic demand.  This averment in itself is contradicting.  It is not correct to say that whatev er imports have taken place we re due to the inability of 
domestic producers to cater to the domestic dema nd.  The domestic producers have a total effective 
installed capacity of 213650 MT per annum.  They  achieved a Capacity Utilisation of about 61%in 
2001-02 which however declined to 38% in 2003-04. No ground therefore exists to hold that the 
domestic producers did not have capacity adequate to  meet the domestic demand of Tapioca Starch or 
to hold that the imports were necessitated because th e domestic producers were not in a position to cater 
to the domestic demand.  The domestic producers have also stated that they can step up their production 
capacities in a short span of time with marginal inv estments to meet any possible increase in demand.  
On the contrary, the cheaper imports restrained  domestic producers to achieve their full capacity 
utilisation and caused price depr ession and inventory build up.  
 Month Domestic Prices PMT (in Rs.) Import Prices CIF (in Rs.) 
2003   
August     11,860  8055 
September     12,027  8363 
October     11,844  3519 
Novembe r     10,324  7889 
December     11,138  8455 
2004   
January     10,636  8977 
February     10,391  8195 
March     10,616  8640  G/SG/N/8/IND/14 
 Page 37 
 
 
 (xiii)   Market Share Taken Over by Imports 
 
 The domestic producers had a market share of 99.70% in the total apparent domestic 
consumption ( ADC ) in 2001-02.  Their market share fell marginally to 98.90% in 2002-03and further 
declined appreciably to 89.38% in 2003-04.  
Year OB 
(MT)  Production 
(MT)  Exports 
(MT)  Domestic 
sales 
(MT)  Total 
ADC 
(MT) Share of 
Domestic 
Sales in 
ADC in % Share of 
Imports in 
ADC 
% 
1 2 3 4 5 6 7 8 
2001-02 87701 132390 2749 139719 140147 99.69% 0.31% 
2002-03 77104 77352 447 96526 97598 98-90% 1.10% 
2003-04 54040 80174 88 93457 104557 89.38% 10.61% 
 
 From the above Table it may be observed that the domestic producers lost a sale of 3069 MT in 
2003-04 compared to 2002-03 which was taken over by the increased imports which captured an additional market of about 7000 MT.  The domestic pr oducers have submitted that they had to make 
several adjustments in the price in order to match the domestic prices with the expected landed cost of 
Tapioca Starch and to retain their market share.   An analysis of various parameters as discu ssed above clearly brings out that the domestic 
industry in the year 2003-04 has witnessed a depresse d condition of operation.  As compared to 2001-
02, it has lost on account of production, capacity utilisation, sales, sales realisation, profit and 
productivity and has ended up in building up of inventor y.  It achieved a small growth in production and 
could retain their sales level during 2003-04 ove r 2002-03 but far below the growth in apparent 
consumption.  This they could do only at the cost of a sharp reduction in their sale price. Serious injury to the domestic industry is thus clearly imminent.  It  is, therefore, observed that the domestic industry is 
suffering a threat of serious injury if the imports of Tapioca Starch are allowed unabated. 
 
10. Causal Link
 
 
(a) Capacity creation 
  It has been argued that if there has been capac ity creation then it cannot be said that there is 
causal link between imports and injury. In this conn ection it is observed that the domestic producers did 
register and witnessed an increased capacity for th e production of Tapioca Starch whose demand had 
increased but the domestic producers have not been able to increase either their production or market 
share.  In the present investigation it is being ex amined whether the domestic producers have faced a 
threat of serious injury as is evident on comparison of their performance in 2003-04 with that of earlier 
period.  In this context, the case of the domestic pr oducers is that they have faced a severe set-back in 
performance as compared to earlier years. It may also be pertinent to observe here that for the purpose 
of the present investigation, what needs to be c onsidered is the domestic industry as defined under 
Section 8B of the Customs Tariff Act, 1975 and not individual units.   (b)  Effect of level of Production and Sales 
  
(i)  Further, it has been averred that if the pr oduction and sales have either remained constant or 
gone up, no causal link can be claimed with imports.  This is not in accordance with the provisions of 
the law which requires determination of injury to be  made on an objective evaluation of various factors 
and not just upon production and sales.  In fact, in  determination of causal link between imports and 
injury, the Annex to Safeguard Duty Rules requires the Director General to evaluate all relevant factors G/SG/N/8/IND/14 
Page 38  
 
 of an objective and quantifiable nature having a beari ng on the situation of that industry, in particular, 
the rate and amount of the increase in imports of that  article concerned in absolute and relative terms, 
the share of the domestic market taken by increased  imports, changes in the level of sales, production 
etc.  If, therefore, the increased imports enter in such condition that despite higher domestic production 
and sales, if the imports occupy a higher market share and thus displace the domestic production, the 
injury so caused is undoubtedly attributable to in creased imports. In the present case, however, there is 
only a marginal increase in production during 2003-04 over 2002-03 but far below the growth 
registered in apparent domestic  consumption i.e. domestic sales including captive consumption 
+imports.  
(ii) A finding of increased imports is to be arrived at  after considering the imports in absolute terms 
as well as compared to the domestic production.  In case the domestic production was increasing but if the imports were increasing still faster, a finding of increased imports can well be made as the imports 
increased both absolutely as well as compared to dom estic production.  Safeguard protection will be 
available to the domestic industry in such a situa tion if it could be demonstrated that the domestic 
industry suffered serious injury or a threat thereof caused by the increased imports.  In other words, a 
finding of serious injury does not necessarily require domestic production to fall.  The serious injury to 
the domestic industry which started taking place in 2001-02 manifested itself more prominently in the year 2003-04.  In this period the domestic sales of  domestic producer declined.  The domestic producers 
could achieve even this reduced sales only at reduced prices . 
 
 An analysis of various factors discussed in  these findings clearly indicates that the domestic 
producers have lost production, sales and profit during the year 2003-04 as compared to 2001-02.  The imports have increased from 428 MTs in 2001-02 to about 11100 MTs in 2003-04, indicating an 
increase by about 2500%.  These increased imports ha ve progressively taken a significant share in the 
apparent consumption which though declined fro m 140147 MTs in 2001-02 to 97958 MTs in 2002-03 
but increased to 104557 MTs in 2003-04.  The serious injury to the domestic industry in terms of sales, 
capacity utilisation etc. is a consequence of these increased imports .  As the domestic producers kept on 
losing production and sale it had its impact on fixed cost, thereby increasing the cost of production and 
reducing the profits.  The increase in imports which ha ve been entering the Indian markets at declining 
prices have threatened  the domestic producers of serious injury specially as they have adequate 
capacity to cater to almost the entire Indian demand of Tapioca Starch . 
 
11. Other Issues  : 
  
(a) Dumping  
   Certain parties have submitted that it was evident from the information provided by the 
domestic manufacturers that there is apparently dumping of  Starch in the Indian market.  In this regard, 
it is observed that lower prices for Indian market as compared to other markets per-se are no evidence 
of dumping of into the Indian market as a product is to considered as being dumped i.e. introduced into 
the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade 
for the like product when destined for consumption in the exporting country.  No information on the 
normal value or any evidence of injury to the domestic industry having resulted from dumping from any specified sources has been provided by any party and,  therefore, the claim is unsubstantiated and does 
not merit consideration.   No assertion by the Applicants or by any other party has been made, leave 
aside any evidence having been produced that the Tapioca Starch imports into India were dumped.   In 
fact, a specific submission has been made by the domestic industry that they are not alleging dumping. 
  G/SG/N/8/IND/14 
 Page 39 
 
 
 (b) Captive Consumption   
 
 It has been argued that consumption of Star ch captively consumed should be excluded from the 
capacities of the petitioners to cater to the demand in the country as the facilities available with them to 
that extent are not available for the merchant market .  This argument is erroneous in as much as if the 
domestic demand includes the captive requirements of the domestic producers, the facilities of the 
domestic producers to that extent can not be ex cluded from the consideration.  Throughout this 
investigation, the domestic demand has been take n including the captive consumption of the petitioners 
and, therefore, this argument is without merit.  (c)  Import Duty Structure in India   
 
 Opposing parties have submitted that in keeping with the growing policy of liberalisation the 
import duty on Starch has been reduced over the year s but still it is the highest in this region and, 
therefore, provides an in built protection and competitiv e parity to the manufacturers in India.  This 
argument, however, is considered to be irrelevant in  the context of safeguard duty as the level of import 
duty on a particular product depends upon various fact ors some of which are level of imports duties on 
comparable and competitive products and on inputs, the need to raise revenue and the disadvantages 
suffered by the domestic producers vis-à-vis international producers etc.  Each country, therefore, decides the level of import duties according to its ne eds, which cannot be viewed as a reference point 
for others.  
 
(d) Effect of duty free imports 
 
 It has been contended that duty free import of material for export production is an in built 
provision in the Export-Import Policy and since such imports of raw materials are used only for export 
production, import of the same does not affect the do mestic production.  I am afraid this argument is 
fallacious.  Whether for use in domestic production, or for use in export production, both the requirements taken together contribute to the domest ic demand and constitute market for the domestic 
producers of Tapioca Starch .  Any material imported for export production, therefore, competes with 
the domestically produced goods.  
 As regards the argument that duty free imports of Tapioca Starch would not be affected by 
imposition of safeguard duty, it is observed that duty  free imports fall in two categories.  One, those 
imported against Advance Licences and meant for u se in export production, and the other those 
imported under  Duty Entitlement Pass Book  Scheme (DEPB) .  So far as imports against Advance 
Licences are concerned, it can be considered that im position of safeguard duty may not have impact on 
such imports, as generally the Government has been exempting these imports from imposition of 
safeguard duty.  DEPB imports are not at the sa me footing as Duty Entitlement Export Certificate 
imports  (DEEC) .  Under the DEPB Scheme the import attract all duties but to the extent duty is debited 
through DEPB credit, the imports are not charged to  duty. Imports under DEPB Scheme are, therefore, 
subject to payment of safeguard duty, if levied.  
 During 2003-04, it appears that only 617 MTs of Tapioca Starch was imported under DEEC 
(Advance Licenses) which works out to just about 6% of the total imports of Tapioca Starch into the 
country.  
(e) Inefficiency of domestic producers 
  An issue has been raised that the domestic  producers of Tapioca Starch are not operating 
efficiently and that their number of operations fo r production is much higher as compared to  overseas 
manufacturers and in particular the Thai manufacturers.  It has also been stated  that their power/water G/SG/N/8/IND/14 
Page 40  
 
 consumption per metric ton of production of Ta pioca Starch is much higher as compared to 
international norms.  
 
 In this regard, it is observed that the very purpose of imposition of Safeguard duty is to allow 
the domestic industry to become competitive.  The fact  that domestic industry is not competitive itself 
indicates that domestic industry suffers from certain inefficiencies which need to be removed by re-
structuring.  If the domestic industry was fully effi cient perhaps it would have been competitive and, 
therefore, no need would have arisen for imposition of  Safeguard duty. It is observed that the domestic 
industry has identified the reasons for their ineffici ency and have requested for imposition of Safeguard 
duty so as to enable them to take  necessary steps for improving upon th e same and to protect them from 
the serious injury caused by the increased imports in the meantime.  
 
(f) Self-inflicted injury  
 
 It has been submitted by some parties that  th e injury to the domestic industry  is self-inflicted 
and only with a purpose to project their injury a llegedly caused by imports the domestic industry has 
furnished certain details which are not supported by any evidence available in public domain.  It has 
been stated that the details furnished by the domestic  industry needs a thorough and critical scrutiny.  It 
was observed that the details furnished by the domestic  producers in their response with regard to their 
capacity, production, cost of  production and sales was observed to be based on the audited statements of 
the concerned producers of Tapioca Starch.  Verificati on of their cost of production of Tapioca Starch 
for the year 2003-04 was carried out with relevant r ecords and balance sheets and was found to be in 
order.  
(g) Loss of Exports 
 
 It has also been claimed that  the reason for the woes of the domestic industry is loss of its 
export market that has declined to 88 MTs in 2003-04 compared to 2749 MTs in 2001-02 and not the imports of Tapioca Starch.  It is important to k eep in mind that the production line for production of 
Starch is common both for the domestic consumption and for the export market.  A domestic industry 
that was not able to compete in the domestic mark et could hardly have been expected to compete 
in the international market, speci ally when the domestic supplies were the major market for the 
domestic industry and exports constituted only a fr action of its market.  The injury caused to the 
domestic producers by the increased imports, therefo re, had its effect on the export performance 
of the domestic producers as well.   12. Analysis of extraneous factors
  
  A number of other issues have been raised by various parties justifying the increased imports or 
to show that the injury caused to the domestic i ndustry was not on account of increased imports but on 
account of other factors .  While the domestic industry has suffered ser ious injury and they have alleged 
the injury to have been caused by the cheaper imports, some othe rs have argued that the injury to the 
domestic producers of Tapioca Starch has been cau sed due to increase in the cost of production of 
Tapioca Starch resulting from the in creased cost of raw material, power , water etc.  The same has been 
examined as under:- 
 
(a)   Raw materials   
  It has been argued that the domestic producers have procured their raw materials particularly 
the raw tapioca tubers for manufacture of Tapioca St arch which was far more expensive which is the 
cause for injury to the domestic industry.  In this  connection the domestic producers have stated that  the 
tapioca tuber (Cassava) price includes cost of tran sportation & handling and also procurement costs.   G/SG/N/8/IND/14 
 Page 41 
 
 
 The increase in transportation cost has attributed subs tantially to the cost of tubers.  This being the 
situation, it cannot be contended that the basic tuber price has increased in the recent years.  
 
(b)  Ground water depletion  
  It has been stated that it is the adverse and hi gh rate of ground water depletion that has affected 
the productivity resulting in increased cost of producti on.  It has been observed that from the details 
furnished, that the tapioca based Starch units have  adequate ground water resources.  Alternative source 
of water such as tanker supplies is also available for certain pockets where ground water level is not 
sufficient.  Hence continuous source of water is available for the manufacturing units.  On account of 
water depletion increase in the cost of production, if l any, would not exceed 2% to 3% of the total cost 
of production.  The industry is more than six deca des old and it has been f acing almost consistent 
weather conditions.  There is no abnormal change in th e weather or rain pattern in the Tapioca growing 
and processing region.  The region has certainly been  witnessing more than normal rains in a given 
period cycle, which helps re-charg ing of ground water.  Further the Tamilnadu Government has brought 
in legislation for mandatory Rain Harvesting systems,  which has been uniformly installed/ implemented 
through out the state.  The effect of this scheme h as already started yielding results and in the years to 
come this scheme will substantially augment th e ground water resources in a substantial way.  
 
(c)  Increase in the cost of energy 
  It has been observed from the details furnishe d based on Audited statements of the domestic 
producers of Tapioca Starch that the cost of energy constitutes about 3% to 4% of the total cost of 
production.  Any increase in such cost either due to increase in power tariff or for drawing water will be 
insignificant as compared to the total cost of production.  .  
 While it may be true that the domestic producers of Tapioca Starch may have become 
uncompetitive on account of relatively high variable costs,  the fact remains that it is the cheaper imports 
which have taken away the market share of the dom estic producers and forced them to restrict their 
production facilities.  
(d) Inability of small scale units to  compete with large scale units. 
 
 The small scale units co-exist along with medium  scale units.  Even though there is competition 
in the industry it is healthy one and not restricted to small scale and medium scale industries.  In fact the 
imports have affected the medium scale industries much more as their capacity utilisation was only 29% 
as against capacity utlisation of 41% by the  small scale units (in the year 2003-04).  Hence it cannot be 
said that the medium scale units are the cause for the injury to the small scale units.  
 
(e) Withdrawal of preferential treatment in respect of Excise Duty to small Scale units vis-à-
vis medium units  
 
 In this connection it has been observed that Ce ntral Excise duty on wet starch was imposed for 
the first time in 1976.  Since there were certain t echnical issues involved as regards the marketability of 
wet starch the excise duty imposed was not given eff ect.  In 1997 the levy was re-introduced but the 
small units on the basis of value of clearances ef fected by them were exempted from such levy.  
Subsequently in May 2000 the exemption was grante d to all units without any discrimination primarily 
to remove the anomaly existing in the industry.  This  was also probably due to the fact that the revenue 
potential was observed to be negligible vis-à-vis the co st of collection.  It may be pertinent to note 
medium scale industries are more affected than the small scale units as evident from their capacity 
utilisation compared to the medium scale units.    G/SG/N/8/IND/14 
Page 42  
 
 13. Adjustment Plan
  
 
(a) The domestic industry have submitted restructur ing plans indicating details of effort being 
taken and planned to be taken to make a positive adjustment to improve their competitiveness.  The 
domestic producers have categorically stated that th ey understand that the relief granted as safeguard 
duty is a short-term measure .  The existing facilities were built  in the pre-liberalisation era and 
lacked economies of scale leading to high fixed costs .  However, the Indian industry has been 
regularly upgrading its technology and improving its manufacturing facilities with the objective of 
reducing their operative costs  per unit and increasing its effective capacity to satisfy the increasing 
domestic demand from most of the sectors.  
(b) The plans of the domestic industry to make adjustment to the import competition are not 
hypothetical.  They have identified the reasons for their being not able to meet with the competition 
offered by the increased imports.  One of the reasons  identified by them is the lack of economies of 
scales.  The domestic producers have constantly been upgrading their production facilities.  The 
domestic producers have furnished essential details of cost saving schemes being pursued by them and 
the cost reduction likely to be achieved there-from in response to the questionnaire in a confidential 
manner.   (c) The domestic producers have submitted details of efforts being made by them for making a 
positive adjustment to meet with the situation of competition offered by the increased imports.  The 
applicants have proposed to take the following me asures to bring down their cost of production to 
improve their competitiveness over a period of 4 years namely: 
 (i) They have proposed to undertake Tapioca T uber seeds development in association with 
Central Tuber Crops Research Institute (CTC RI), Trivandrum and Tamilnadu Agricultural 
University Coimbatore, which will enhance the yiel d of Tapioca tubers and its Starch content. 
CTCRI is the Nodal Agency for conducting a nd co-ordinating research on various aspects of 
tropical tuber crops in India.  It is also the leading organisation in the sphere of technology 
transfer of tuber crops in India.  
 
(ii) The Technical Advisory Committee of Starch & Sago manufacturers has identified 
certain technological improvements at a nominal cost which can be implemented by the 
industry, namely, 
 
(a) Hydrocyclone facility for reducing water consumption and pollution load by 
about  fifty percent. 
(b) Rasper for better recovery of Starch from tubers  
(c) Sand Cyclone for removal of sand and silicon from the Starch and Sago for 
improving the quality. 
(d) Pulp Press for improving extraction of Starch from tubers and reducing 
fermentation effects. 
(e) Reverse Osmosis Plant/De-mineralization Plant for purifying and recycling of 
water. 
(f) Separator for improving extraction of Starch. 
(g) Automatic Roaster and Dryer for improving the quality of Starch and Sago and 
for enabling continued production even on cloudy and rainy days. 
(h) Automatic Peeling Machine for peeling the skin and rind of the Tapioca tubers. 
 
(iii) The Starch and Sago industry generates a m assive quantity of waste in the shape of 
Thippi , a by-product used as cattle feed, which is no w being sold without any value addition.  
They are in the process of treating this by -product and marketing it with suitable value 
additions for bringing about a substantial cost reduction.  G/SG/N/8/IND/14 
 Page 43 
 
 
   
 In addition it has also been mentioned by Sp ac Tapioca Products (India) Limited Erode, Tamil 
Nadu that their manufacturing plant has been set up with the Thai collaboration with a state of art 
technology and it is a new plant, fully mechanized  meeting the international quality standards and 
specifications.  Being a new plant any cost reducti on can only be achieved through better utilisation of 
capacities.  However they have been making all ef forts in reducing their cost of production and for 
achieving better plant parameters.  Serious a ttempts are being made by way of in house Research and 
Development  to bring about optimum efficiency for better yield both in tuber produce and its starch 
content.  They along with other Starch manufacturers in Tamilnadu and SAGOSERVE are closely associated with the efforts taken for enhancing the yi eld of Tapioca tubers and its Starch content, under 
the guidance of Central Tuber Crops Research Institute (CTCRI), Trivandrum and Tamilnadu 
Agricultural University Coimbatore.  They have  set up their own Research & Development division 
and continuous efforts are being made  in various facets of tapioca cultiv ation, such as trial plantation of 
Cassava Mosaic Disease  (CMD) resistant tuber, improving farm techniques as per experts advise, 
exploration and testing of new areas for tapioca pl antation.  As a measure to help the farming 
community, they have approached Indian Overseas Bank to provide crop loans to the farmers, under a 
tripartite arrangement with them.   (d) In regard to the adjustment plan of the domes tic Tapioca Starch industr y the main issue raised 
some of the opposing interested parties  is that the ad justment plan is not product-specific i.e. it is not 
related to improvement in the quality of Starch. In rega rd to the issue that the restructuring plan is not 
product specific, it is observed that the law does not  require the restructuring plan to be product 
specific.  Besides, any plan that attempts to impr ove upon the cost of production of the product, fixed or 
variable, cannot be said to be a plan not having a bearing on that product.  (e) In this connection, it is observed that they ha ve planned to achieve better plant efficiency by 
maximizing the plant capacity utilization.  They ha ve identified the higher fixed cost as the major 
problem concerning their production, which they have  sought to overcome.  The details furnished by 
the domestic industries are considered to be ade quate as they specifically address to the problem 
identified by the domestic industry and constitute a r easonable plan to restructure the domestic industry .   
 (f) It is also observed that the Government of  Tamilnadu also has accorded importance to 
development & construction of roads and several wo rks have been initiated with massive investments 
with the assistance of the World Bank. In Perambalur  District of Tamilnadu alone which is a Tapioca 
growing area projects including water supply projects, relaying of roads worth about Rs 300 Crores have been undertaken.  The price crash enhanced th e adverse impact on the Tapioca growing territory.  
The fall in prices has harmed these districts of Tamil Nadu. The small farmers are in debt trap.  The 
proposed developmental activity will definitely expedite and facilitate  the farming community to take 
their produce namely Tapioca Tubers to the processi ng industries and thus bring about cost reductions. 
 
(g) The Indian Tapioca Starch industry is unique in itself. It is highly fragmented and most of the 
members are in unorganized sector.  Most of them work in their own mills and earn their livelihood.  That being so their ability to restructure to bring about any major cost reducti on is extremely limited.  
The only alternative is to improve their capacity u tilization to optimize the cost.  Higher capacity cannot 
be achieved unless the right environment exists.  Howeve r, the restructuring plans appear to be viable, 
which is likely to be implemented and give results in a period of about four years.  It is, therefore, 
observed the domestic industry is in the process of ma king positive adjustment to compete with imports 
and that they require about four years to become competitive.   14.  Provisional Safeguard Duty
  
 
 In view of the fact that critical circumstances indicating that the domestic industry is likely to 
suffer irreparable damage in case imposition of saf eguard duty was delayed till the completion of the G/SG/N/8/IND/14 
Page 44  
 
 investigation did not prima facie exist, no recomme ndation to impose provisional safeguard duty was 
made.  
15. Share of Countries in Exports to India
  
  On the basis of information in regard to im ports of Tapioca Starch into India during the period 
2003-04 , it is observed that only two countries namely Thailand and Vietnam exported the said Tapioca 
Starch to India during this period.  Their shares in India’s imports during this period on the basis of Bill 
of Lading quantities were as under.   
 
Country / Territory Imports - MT %age share 
Thailand 7372.154 66.42% 
Vietnam 3727.428 33.58% 
Total 11099.582 or say 11100 100% 
 
16. Public Interest  
 
(i) Some of the parties have argued that impositi on of safeguard duty would not serve any public 
interest.  On the contrary, imposition of safeguard duty would severely prejudice the public interest as a 
number of end user industries may close down.  It has been claimed that imposition of Safeguard duty 
on Tapioca Starch would make it costlier and this woul d be against consumer interest.  In this regard, it 
is observed that the imposition of safeguard duty is not  likely to have any significant effect on the user 
industry and the consumers thereof especially as the saf eguard duty is proposed to be imposed only to 
the extent necessary to protect the domestic producers of  Tapioca Starch.  Further, it is observed that the 
expression ‘public interest’ does not cover in its ambit c onsumer interest alone.  It is a much wider term, 
which covers in its ambit the general social welfar e taking into account the larger community interest.  
While the imposition of safeguard dut y may result in increased cost of imported Starch in the hand of 
buyers and therefore, it may also affect the end produ cts manufactured therefrom, it is important to keep 
in mind the objective of imposition of safeguard duty.   The purpose of imposition of safeguard duty is 
to provide time to the domestic industry to make positiv e adjustment to meet with the new situation of 
competition offered by the increased imports.  The imposition of safeguard duty, for the period and to 
the extent just adequate would, therefore, not only mi nimise the adverse effect, if any, for the customers 
but also allow them a wider choice to source thei r requirements, and at competitive prices.  The 
domestic producers who are mostly in small scale unor ganized sector and have set up plants with their 
own investments provide employment to a large numb er of people and make valuable contribution to 
the national economy.  Safeguard duty, which would enable the domestic producers to survive in the 
face of competition offered by the increased imports, will, therefore, also be in the long-term interest of 
the buyers of Starch and Sago as well as of the buyers of products manufactured therefrom.  
 (ii) It has also been submitted that imposition of safeguard duty will adversely affect country’s 
exports, as imported Starch used in export production w ill become costlier.  In this regard, it is observed 
that in international trade exports are net of duties and taxes i.e. all duties and taxes including safeguard 
duty paid on inputs used in the manufacture of ex port production are entitled to be refunded as duty 
drawback etc.  Duties and taxes including safegua rd duty paid on imported Starch used in export 
production would also, therefore, be entitled to be refunded.  The objective of safeguard duty is to 
enable the domestic producers to become internationa lly competitive.  If, therefore, the domestically 
produced Starch is not internationally competitive for use in export production, imposition of safeguard 
duty should help it in becoming internationally competitiv e, which should be in the long-term interest of 
the exporters.  As far as duty free imports of Star ch under various schemes for use in export production 
are concerned, the same principle as discussed above  applies i.e. either such imports may not be  G/SG/N/8/IND/14 
 Page 45 
 
 
 subjected to levy of safeguard duty, ab initio,  or if safeguard duty is collected, it should be entitled to be 
refunded on export of final product, in accordance with th e existing laws.  It is, therefore, observed that 
imposition of safeguard duty on Starch is neither likel y to affect adversely the export production, nor is 
it against the public interest.  
 
(iii) Interest of Farming Community   
 
(a) Tapioca is a crop of great economic importance,  both as human food, animal feed as well as a 
raw material for industrial products.  It is consid ered to be the cheapest source of Carbohydrate among 
the cereals, tubers and root crops.  In Tamilnadu, Tapioca is grown in an area of 0.9 lakh Hectares with 
the productivity of 35 MT per Hectare, which is highest in the world.  It is cultivated both under 
irrigated and rain fed conditions.  It is also gr own as intercrop in Coconut plantations.  Salem in 
Tamilnadu has traditionally been the land of Sago and Starch.  The Industry got a boost during the 2nd 
World War when imports from the Far East were difficult.  The Sa lem region offers good raw material, 
cheap labour and good sunshine for a longer period of the day throughout the year, helping the 
manufacturers to produce Tapioca based products namely, Sago and starch.  The increased imports at 
lower prices have adversely affected the Tapioca Fa rmers who are more than five lakh in numbers in 
Tamilnadu alone.  The area under cultivation of Tapi oca has been declining over a period due to the 
lethal mix of increased imports at very low prices.  As a sequel, the realisation of farmers for their tuber crops which is highly perishable has not been commens urate with the increase in its cost of cultivation.  
This has resulted in many of the farmers abandoning  the cultivation which has thrown them out of 
employment and leading to misery.  In the event of the domestic industry not being protected, it is 
apprehended that more and more farmers will desi st and abandon Tapioca cultivation which will have 
its own serious consequences on the availability of ra w material and lead to an agrarian disaster. 
 (b) Tapioca starch is grown in plains and also in certain pockets of hi lly regions around Salem in 
Tamilnadu.  In the hilly regions, Tapioca is grown predominantly by tribals who will also be severely 
affected.  The tuber crops play a significant role in the food security of majority of tribes.  The climatic 
and soil condition of the hilly regions in this part of the state does not permit any cultivation other than 
Tapioca.  These tribals have no other source of income  and are solely dependen t on Tapioca farming.  
Given their economic and educational backwardness,  any injury to Tapioca based industries will 
directly hit their livelihood and their very survival will be at stake.  In India agriculture is not an 
agribusiness but a way of life. 
 (c) It is observed that the farmers have b een continuously adopting improvement in farm 
technologies and farming techniques to achieve better yield of the crops and to reduce their cultivation 
costs under the guidance of SAGOSERVE and  Central Tuber Crops Research Institute (CTCRI), 
Trivandrum. CTCRI is the Nodal agency for conduc ting and coordinating research on various aspects of 
tropical tuber crops in India.  It is also the leading organisation in the sphere of technology transfer of tuber crops in India.  The increased imports at lower prices have dampened the prices leading to depression of national prices. It is apprehended that as a sequel, the farmers may not be paid their dues 
and might move away from cultivating Tapioca in year s to follow.  This would besides pushing them 
into a debt trap but would also result in increased imports. 
 
 In view of the foregoing it is considered th at imposition of safeguard duty will be in public 
interest.   
 
F. CONCLUSION AND RECOMMENDATION 
 
 (a) In view of the findings above, it is concluded that increased imports of Tapioca Starch into 
India have threatened to cause serious injury to th e domestic producers of Tapioca Starch and it will be 
in the Public interest to impose safeguard duty for a period of three years  on imports of Tapioca Starch 
into India.  In arriving at the amount of safeguard dut y that would be adequate to prevent serious injury G/SG/N/8/IND/14 
Page 46  
 
 to the domestic industry and to facilitate positive adju stment, weighted average cost of production has 
been taken into account for the period 2001-02 to 2003-04.  The domestic producers have claimed a 
certain amount of profit on the basis of expected retu rn on capital employed etc. which is considered to 
be on the higher side and, therefore, a lower amo unt of profit (confidential)  based on the weighted 
average cost of production has been  considered appropriate and allowe d. Similarly, the C.I.F. import 
prices also have been considered on weighted aver age basis for the period 2003-04.  Adjustments have 
been made in the C.I.F. import price for handling char ges on an average basis.  The extent of protection
 
has also been considered on the basis of benefit lik ely to occur from the restructuring of the domestic 
industry besides keeping in mind certain extraneous factors that may have a bearing on the cost of 
production and only the minimum level of protecti on is being recommended that would facilitate the 
domestic industry to make a positive adjustment.  
 (b) Some parties have also argued in favour of a trigger price mechanism  i.e. safeguard duty be 
imposed only on imports entering at a price lower than a reference price.  This however, is considered irrelevant for the present proceedings as safeguard measures are not targeted against unfair imports but 
seek to provide protection to the domestic industry,  if the imports enter in increased quantities and 
under such conditions so as to cause or threaten to ca use serious injury to domestic producers.  Also, it 
does not appear to be legally tenable in the contex t of safeguard investigation as that would give it a 
colour of a price based measure where the low priced imports, although not unfair, would get discriminated and charged to safeguard duty, wher eas the higher priced imports would not attract 
safeguard duty.  This does not appear to meet  with the objectives of safeguard measures which 
encourage the domestic producers to make efforts to  become competitive, ra ther than encouraging 
inefficiency for the domestic industry or for the expor ters.  The trigger price mechanism on the contrary 
penalises the efficient foreign producers, wh ile encouraging the inefficient producers. 
 (c) De-minimis criteria for developing countries : 
 
 It has been stated by Ministry of Commerc e of PR China that Article 9 of Agreement on 
Safeguards provides that safeguard measures shall not  be applied against a product originating in a 
developing country as long as its share of imports of the product concerned into the importing Member 
Country does not exceed 3% provided that developing  country Members with less than 3% import share 
collectively account for not more than 9 % of total im ports of the product concer ned. In this connection 
it is observed that In pursuance of Clause (a) of sub- section (6) of Section 8B of the Customs Tariff Act, 
1975, the Department of Revenue, Ministry of Finan ce, Government of India has issued Notifications 
No. 103/98-Cus dated 14
th November 1998 & 62/99-Cus dated 13th May 1999 notifying the list of 
developing countries for the purpose of Article 9 of the Agreement on Safeguards.  Thailand and 
Vietnam are included in the said list of notified co untries. Since the share of imports from these two 
countries is collectively more than 9%, no exemp tion from payment of safeguard duty on Tapioca 
Starch is available to any other developing countr y even though their individual share may not exceed 
3%.  (d) Considering the need to progressively liberali ze the safeguard duty in or der to facilitate positive 
adjustment by the domestic industry, it is recommend ed that safeguard duty be imposed on imports of 
Tapioca Starch (classified under Chapter Heading 11081400 / 11081910 / 11081990 ) into India  at the 
rates specified below on ad-valorem basis over and above  the existing level of effective protection, for a 
period of Three years  as under being the minimum necessary for the protection of the domestic 
industry from the serious injury threatened to be caused by the increased imports of Tapioca Starch.  
  G/SG/N/8/IND/14 
 Page 47 
 
 
  No safeguard duty is recommended on import s of Sago based on Tapioca (Sabudana) and 
Modified Starches falling under Chapters 1903 and 3505 of the Customs Tariff Act, 1975, respectively. 
 
(Lakhinder Singh) 
Director General 
 
                                  __________ 
 Period Level of total protection 
recommended % Existing level 
of effective 
protection % Safeguard duty 
recommended % 
(2) - (3) 
(1) (2) (3) (4) 
First year 30+33 33 
Second year 30+23 23 
Third Year  30+13  
30% 
13