The Hindu Business Line : Customs duty anomaly hits copper tube makers

MANUFACTURERS of copper tubes in the country are now facing a dark future and will have to close down their units due to the reduction of customs duties and the increase in international copper prices.

On January 8, the peak rate of customs duty on Chapter 74 for various items was reduced to 20 per cent from 25 per cent. The rate of duty on copper tubes listed under chapter heading 7411 (CN No. 27/2004) was further reduced to 15 per cent for import and use in products falling under chapter heading 8415-10-90 i.e., `other air conditioning systems' and chapter heading 8418-21-00 i.e., `refrigerators (compression type)'.

Therefore, the customs duty on copper tubes for the major use industry — air-conditioning and refrigeration, has been further brought down to 15 per cent. However, the customs duty on copper scrap copper cathode and copper wire bar (raw material) still stands at 20 per cent. Therefore, the finished product — copper tubes now attract a lower custom duty than the raw materials — copper scrap, copper cathode or wire bar.

"The decision allowing import of materials at concessional rates for use in the manufacture of goods of specific description has grave implications on large number of small-scale intermediate units of copper, brass and aluminium products," Mr Rohit V. Shah, President of The Bombay Metal Exchange Ltd (BME), said.

The local SSI units already face serious handicaps by way of higher electricity charges, diesel, petrol, and furnace oil; as also octroi, central sales tax, turnover tax and other local levies which comes to almost 10 per cent.

Moreover, LME prices over the past one-year have gone up by over 74.09 per cent and domestic prices by 48 per cent.

SSI units are facing imminent closure. The imbalance in price has led to a situation where the locally made copper tubes are costlier than the imported copper tubes, Mr Shah said.

No manufacturers such as Voltas, Blue Star, Godrej and Videocon will now buy domestic copper tubes when they are allowed a special treatment of import duty of 15 per cent for copper tubes imported, he said. Moreover, they are able to get imported copper tubes on 180 days letter of credit at the interest rate of Libor, whereas on the other hand, the SSI units here have to bear an interest cost as high as 13 per cent, he added.

Therefore, BME has appealed to the Government to keep customs duty on copper scrap, copper wire bars, copper cut pieces at 5 per cent and on copper tubes for use in refrigeration machines and refrigerators at 20 per cent.

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