... Wants 20% Basic Customs Levy On Refinery Equipment

The Confederation of Indian Industry has suggested that the government should impose a 20 per cent basic customs duty on capital goods for supplies to refineries as applicable on project imports and a countervailing duty (CVD) equal to the central excise duty.

CII, in its pre-budget memorandum to the finance ministry on capital goods industry, has suggested that the similar customs duty be imposed on capital goods which are supplied to fertiliser units.

In addition, it says the existing special duty on 2 per cent and 3 per cent should be retained and the CVD should equal the excise duty with 5 per cent additional duty. The suggestions have been made to obviate negative protection for the domestic industry, the CII says.

The proposals have been made in continuation of CIIs plea that the zero duty structure on capital goods should go as it affects the domestic industry. No country has zero duty on imports of capital goods which are domestically produced... Even in World Bank funded projects, 15 per cent price preference is accorded to indigenous manufacturers, itsays.

At present, the government has allowed zero duty import of capital goods for fertiliser and refinery sectors. According the CIIs estimate, capacity utilisation of the indigenous industry catering to the fertiliser and refinery sectors on an average is down to 50 per cent in 1996-97, and is likely to further drop to 35-40 per cent.

Moreover, CII feels that the capital goods industry is suffering due to anomalies in the customs duty structure. The sector, which grew at 17.7 per cent in 1995-96, witnessed a negative growth of 1.8 per cent in April-February 1997-98 as compared to 7.2 per cent in 996-97.

The anomalies, CII says, are in the form of differential tariff rates for capital goods, raw material and components. While customs duty on capital goods was reduced from 25 to 20 per cent in the last budget, that for raw material like steel was retained at 30 per cent and components in the range of 30-40 per cent.