The Union ministry of chemicals proposes to impose a chemical upgradation and innovation cess at the rate of 0.5 per cent ad valorem on chemical industries. The aim is to collect funds for establishing a Technology Upgradation and Innovation Fund.
An official source said this proposal was in line with the cess imposed by the ministry of new and renewable energy to set up a clean energy fund or as with the case of the telecom fund of the department of telecommunications; in fact, DoT imposes a five per cent cess on an operator’s gross revenue.
However, the chemical industry is opposing the idea at this stage, saying its profitability is already badly hit from both lower exports and a glut at home.
Officials say the domestic market for basic chemicals is saturated, while companies are not equipped to upgrade their factories into manufacturing of specialised chemicals, which do have a lot of demand and less dependence on feedstock. They explained the industry could avail of funds to increase research and development (R&D) spending, from the existing one to two per cent of their total expenditure to five to six per cent.
The R&D spending could focus on aligning technology, demand, standards and regulations after examining emerging technologies and trends, they said. Another focus area could be creation of intellectual property rights (IPR) through synergy between academic centres, manufacturers, R&D centres, etc. “The idea is to strengthen links in the complete value chain from research to IPR generation, product design, development and commercialisation, so as to become internationally competitive,” they said.
The draft policy for the industry has also suggested bringing molasses and alcohols under the proposed Goods and Services Tax, to eliminate the differential duty between states and its effect on production of ‘green’ chemicals, the latter produced by using bio-chemical feedstock such as agro waste. Similarly, electricity duty and power cess levied by states on captive power generated and supplied should attract value added tax, since input credit can be availed by users. Currently, it is a burden on chemical manufacturers as the duties and cess on power can be as much as 10-40 per cent.