The Hindu Business Line : Compressor makers seek import duty hike

THE Compressor Manufacturers Association of India has sought the Finance Ministry's intervention for revision of import duty on compressors to the peak rate of 20 per cent.

Compressors have always been kept at a peak rate of Customs duty. The duty was for the first time brought down from 25 per cent to 15 per cent within a span of 15 days in January this year.

Further, the import cost has come down by almost 15 per cent to 16 per cent in one stroke (considering removal of special additional duty ), said Mr Harendra Kumar, Secretary General, Compressors Manufacturers Association of India (CMAI).

Besides this, the domestic industry was severely affected by the increase in price of commodities such as steel and copper during this period. This resulted in a "scissors effect" cutting from both sides, he told presspersons here on Wednesday.

"As it is, industry was facing tough competition from import of compressors and this reduction in duty has further put the industry in trouble. Today, the industry is unable to compete with imports from countries with huge economies of scale, raw materials at international prices, supportive tariff and concessions and more so, huge surplus capacity," he said.

To correct this situation and offer a level playing field to domestic players, CMAI has urged the Ministry to intervene so that the import duty on compressors can be revised to the peak rate of duty of 20 per cent.

On the issue of why import tariffs should remain at peak level, he said the inverted duty structure with raw materials would make local value addition totally unviable. Elaborating further, he said, compressor tariffs will go down from 15 per cent to zero, but the duties on steel, aluminium, copper and zinc will not change, making local value addition unattractive. "We need tariff to compensate for a 20 per cent cost disadvantage arising out of higher taxation and poor infrastructure," he pointed out.

Currently, the total installed capacity for compressor manufacturing is close to 7.6 millions including capacities of captive manufacturers. The total market size in the country (consumption 2003) is four million including compressors produced by captive manufacturers such as Godrej, LG and imports.

According to CMAI, investments of over Rs 900 crore have already been made by the compressor industry through foreign direct investment and domestic investment, excluding investments made in captive units by LG and Godrej.