Deal Soon On Refineries' Capital Goods Imports
Refinery companies and domestic manufacturers of capital goods are close to finalising a settlement on the contentious issue of import duties.
Under the compromise being worked out, companies setting up refineries will earmark a certain percentage of their capital goods purchases for domestic manufacturers. In return, the domestic manufacturers will not push for abolition of the zero-duty import of capital goods allowed for new projects and expansion projects in core sectors like refineries and fertilisers. Domestic industry will also assure them on adherence to delivery schedules.
The common platform for the settlement has been provided by the Confederation of Indian Industry. The settlement has been arrived at after a series of meetings between the refinery committee of the chamber and its capital goods committee.
The CII capital goods committee is headed by Shailesh Sheth, former president of Indian Machine Tools Manufacturers Association, while the refineries committee is headed by Indian Oil Corporation chairman M A Pathan. Deliberations between the two started sometime back with a view to devise a balanced and consensus recommendation.
"CII has played a positive role by bringing together those who are setting up refineries and those who are supplying them with capital goods. It is an informal understanding we are working towards. The significant thing is that a discussion within the industry is taking place," CII president Rajesh V Shah said. The post-budget analysis of CII said the government's decision to impose the 4 per cent special additional duty on imports was a recognition of the need to give the domestic industry a level playing field.
However, he expressed regret that capital goods suppliers to refineries had been exempted from it.
According to the chamber, the non-imposition of the countervailing duty on most imports for projects was putting the indigenous industry at a severe disadvantage, as it was subject to various local levies such as sales taxes and octroi, resulting in a negative protection of 20-32 per cent. It had pointed out that no country had allowed duty-free import of capital goods that were locally manufactured. The controversy had broken out following CII's pre-budget recommendations for capital goods, seeking a 10 per cent basic duty along with the existing 10 per cent CVD on capital goods imports for refineries, or alternatively, 20 per cent basic customs duty and CVD equal to the modvatable central excise duty. CII's stand was castigated by refinery majors, who accused the chamber of adopting a partisan approach.