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MADURAI, March 14

THE trade circles here have called for withdrawal of the levy of eight per cent excise duty on refined edible oil.

The Tamil Nadu Foodgrains Merchants Association in a letter addressed to the Union Finance Minister has said that the Union Budget has ignored the fact that the edible oil industry was already under a recession due to the huge imports of this commodity.

While the Finance Minister has ignored many of Kelkar's proposals, it is saddening that his proposal on edible oil has been conceded despite the widespread criticism.

The additional burden of 8 per cent excise duty on packaged edible oil will affect the traders and general public.

The Tamil Nadu Chamber of Commerce and Industry has also made a strong representation to the Union Finance Minister for the immediate withdrawal of excise duty levied on refined and branded edible oil in unit containers for retail sale.

The chamber, in a statement, has said this regressive move amounted to punishing producers of pure edible oil and those who have established a brand name. The levy has serious financial implications on the housewife's family budget as it would lead to an escalation of Rs 3 to Rs 5 per kg.

The association felt that the hike was in contradiction to the Government's policy to promote agro-based and food processing industries in the country.

The market share of the refined, branded and packed edible oil is less than 10 per cent and hence the revenue accrual to the exchequer on account of this new levy may not be sizeable, the association felt.

The industry was already struggling on account of unhealthy competition and unfair trade practices from unbranded and inferior quality edible oil producers; the new excise levy will lead to mushrooming of such unbranded edible oil producers, the association felt.

High prices of refined oil may force consumers to buy unbranded ones and thereby put their health to risk.

The association was of the opinion that when prices were already ruling high on account of domestic shortage, drought and anticipated low oil seeds output, the excise duty would jolt the industry. The country's self-sufficiency in edible oil was down to about 50 per cent with the industry supplementing the rest through imports.

The association felt that the levy would affect the agriculturists as they would get unremunerative price and there would be further slippage in domestic cultivation of oil seeds, which is not desirable.

Refined edible oil industry is forced to bear the burnt of dual levy. On the one hand customs duty on basic raw material — crude edible oil, which is in the high order without CVD, denying the opportunity for CENVAT and on the other the new excise levy of 8 per cent on refined edible oil.

The association has pointed out that this sector is already contributing Rs 5000 crore in the form of customs duty.

The Government, while announcing the duty, has had a misconception that the industry could avail itself of CENVAT credit. In reality the extent of CENVAT credit is very marginal as this applies to packaging material and consumables, which work out to only 25-30 paise per litre. This is very insignificant compared to the fresh excise duty levy of Rs 3 to Rs 5 per litre, it said.

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