Ahead of any possible objection arising from commencement of the election process, the government reduced customs duty on a whole range of inputs and raw materials used in the manufacture of final products covered under Free Trade Agreement (FTA) between India and Thailand. Duties have been lowered from 20% to 10% on several inputs including automobile raw materials and intermediaries and from 20% to 15% on a few others.
Beneficiaries of the concessional duty are domestic auto component manufacturers, component manufacturers of picture tubes, refrigeration and air-conditioning equipment and polymers.
Domestic component manufacturers from these sectors made loud protests shortly after India signed the FTA with Thailand, saying that it would adversely impact their sectors as the duty on the final product would be lower than the duty on inputs used in the manufacture of the final product.
The government has in the process of giving relief corrected this anomaly.
A concessional duty of 10% has been given for several inputs including alloy steel of various grades, spring steel quality, free cutting steel, silico manganese steel, aluminium sheets, copper tubes, aluminium tubes, glass frit, among others. Import duty has been lowered to 15% on catalysts and copper tubes.
The import of inputs at a concessional rate of duty would be subject to actual user condition in the case of products like specific categories of steel, aluminium foils. However, import duty on components used in the manufacture of picture tubes will not be subject to actual user condition.
However, the government's decision to reduce customs duty on components ahead of the duty reduction in the final product covered under the FTA has been done to avert any possible objections from the Election Commission. It is reckoned that once elections are notified, the EC could raise objections to any policy decision by the government to give relief to the domestic industry. The Central Board of Excise and Customs (CBEC) has, hence, exercised its powers to notify the duty reduction.
The list of goods for which duties are to be brought down to zero by March '06 include a variety of petrochemicals and polymers, apart from other items like marine foods, white goods, electrical machinery, precious stones, office equipment, printed circuits and key auto components like gearbox and petrol engines.
Import duties on items covered under more than 80 tariff lines have to be brought down by 50% starting March '04, and further down by 75% before March '05 and totally eliminated by March '06.
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