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The government may take a relook at its decision to bring down Customs duty on chemicals and petrochemicals from Singapore to zero in the next three years. The department of chemicals and petrochemicals (DoCP) has objected to the Cabinet's recent decision of removing Customs duty on 69 polymer, chemical and pesticide items as part of additional sops offered to Singapore under the bilateral comprehensive economic co-operation agreement (CECA).

"We have to take into account implications of any tariff decrease here as the government is also simultaneously discussing such prospects with Asean nations. Opening up the chemical and petrochemical sector at a time when the industry is yet to find its feet would be detrimental for the domestic industry," a DoCP official said.

The Union Cabinet, in November, had decided to move 555 items from the negative to normal list for trade with Singapore. The lists included 14 polymer items, six nylon/polyester filament yarns, 17 chemicals and 32 pesticides. The government proposed to move polymer, chemicals and pesticide items into the normal track I list, while it proposed to move yarn to track II list. Under track I list tariff would come down to zero by 2011, while under track II, duties would come to zero by 2015.

The import duty on polymers is at 5% in India, while in Indonesia, Malaysia, Thailand and China the rates are 10%, 25%, 15% and 7.8%, respectively. "In such a scenario, it would be advisable to retain the items in the negative list or at best go to the normal track II. Track I should be avoided at any cost," said the official. This would give the domestic industry time to prepare for international competition.

Tariffs have come down from a peak of 35% in 2001-02 to between 5-10% at present.

DoCP further argued that in the case of chemicals and pesticides, the import duty is 7.5% against 20% each in Indonesia, Malaysia and Thailand and 6.5% in China. Bringing it to zero may result into other countries routing their products through Singapore, it said. "Our worry is that other countries may route their supplies via Singapore and it would be difficult to enforce the rules of origin," the official said.

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