Epcg Concessional Duty To Be Cut To 10%
The concessional customs duty on capital goods imports under the Export Promotion Capital Goods (EPCG) scheme is likely to be reduced from 15 to 10 per cent, according to senior sources in the commerce ministry.
The director-general of foreign trade, S B Mahapatra, confirmed that the proposed reduction was being considered by the government. However, he added that the reduction would probably be announced in the new Export-Import policy (Exim) policy rather than in the budget.
The EPCG scheme permits the import of capital goods at a concessional rate of customs duty. Under the scheme, importers who undertake an export obligation of four times the c.i.f (cost, insurance and freight) value of the imported goods are required to pay only 15 per cent of the c.i.f. value. The export obligation has to be fulfilled within five years
The attraction of the concessional rate had dimmed recently because of the reduction in customs duty to below 15 per cent for certain items. For instance, the present import duty on textile machinery is 10 per cent. Hence, the move to bring down the concessional rate to 10 per cent.
The EPCG scheme also permits import of capital goods at zero duty by projects that are worth over Rs 20 crore. Industry has been demanding a lowering of the threshold limit for zero duty since that it prevents small and medium-scale units from deriving benefits under the scheme.
However, commerce ministry officials said it would be impossible to grant this demand keeping in view the large value of EPCG licenses issued at zero duty in 1995 and 1996 and the fact that the zero-duty window was meant for facilitating capital-intensive projects with long gestation periods.
The officials added that the domestic capital goods industry was also opposed to the removal of the Rs 20-crore limit since it would kill the domestic industry.
Domestic companies have also been lobbying strongly against the import of second-hand capital goods, which is permitted under the scheme, arguing that too much second-hand and second-rate machinery is being imported into the country at discounted duty rates.
Despite carping by detractors, the scheme appears to have delivered good results.
Capital goods imports of over Rs 9,500 crore were allowed at zero duty in 1995-96 against a total export obligation of Rs 66,650 crore, while the total export commitment has crossed Rs 100,000 crore in the current year. Industrial units that have availed of the scheme have also responded well, with over 90 per cent of the export obligations having been met in 1990-91 and 1991-92.