The Finance Ministry is likely to address in the Budget the inverted duty structure existing in certain sectors such as marine products, chemicals and solar components.
However, intervention may be limited to sectors where farm goods are not involved.
In an inverted duty structure the duty on raw materials is higher than the duty on the finished goods. Such a situation makes the domestic manufacturing industry less competitive.
With the manufacturing sector contracting by 0.7 per cent in December, such a move is imperative. Overall industrial production registered a growth of just 0.7 per cent in December. The Commerce Department has submitted a list of products for the Finance Ministry’s consideration where import duty on inputs is higher than that on finished goods and need to be brought down. A number of such items are, however, agricultural and are politically sensitive.
“The list of items where inverted duty structure exists is long. While it may be easier for the Finance Ministry to rectify it for items such as chemicals and marine products, it would be difficult for products such as silk and rubber where farmers are directly involved,” a Government official told Business Line .
While there are a number of chemicals where the inverted duty structure exists, it is also present in the marine goods sector. “There is a possibility that such anomalies will get addressed in the Union Budget,” the official said. Talking more specifically he explained, “This is a big disincentive for our nascent solar energy industry and certainly has to be addressed.” Exporters’ organisation FIEO has also stressed on the need for removing inverted duties wherever they exist.
“Of course we understand that the Government cannot do it for goods that have dual use like, for instance, plastic, but for single-use goods, it can certainly be done,” FIEO Director-General Ajay Sahai told Business Line .
The Commerce Department is not so sure about the Government being in a position to increase import duties on farm products.
“We know that the rubber industry and silk manufacturers have a valid demand that import duty on the raw materials should be lower than that on the finished products, but unfortunately we are not sure if the Finance Ministry could afford to upset the farm sector especially when the Government is preparing for elections,” the official said.
amiti.sen@thehindu.co.in
shishir.sinha@thehindu.co.in