Financial Daily from THE HINDU group of publications
Thursday, Jul 14, 2005
Industry & Economy
Octroi burden forcing non-ferrous traders see outside Mumbai
Mumbai , July 13
MUMBAI may face a fresh flight of small-scale units that use non-ferrous metals as raw material to various locations outside India's commercial capital owing to the burden of high octroi duty of three per cent levied by the Bombay Municipal Corporation. These SSI units are engaged in manufacture of a wide array of products, ranging from auto components and electrical items to switch gear products and extrusion units.
Informed sources say that the SSI units, which use non-ferrous metals such as copper, aluminium, nickel and tin, are thinking in terms of shifting their base from Mumbai to nearby places such as Navi Mumbai, Bhayander and Bhiwandi or even to as far as Rajasthan, Daman and Silvassa, to avoid the stiff octroi duty imposed by the BMC.
Apart from SSI units, a host of other intermediaries that use non-ferrous metal products such as strips, coils, foils, sheets and plates to reshape them as per different specifications of different end users, are also thinking in similar terms on this score.
Said Mr Rohit V. Shah, President of the Bombay Metals Exchange (BME): "Already 40 per cent of the non-ferrous metal trade, involving SSI units, intermediaries and traders, has shifted base from Mumbai."
The burden of octroi on copper has increased from Rs 2,916 per tonne to Rs 6,300 per tonne in the last five years on account of sharp rise in metal prices. Similarly, local tax on nickel has also increased from Rs 12,418 per tonne to Rs 25,260 per tonne. Octroi on aluminium has also increased to Rs 3,060 per tonne from Rs 2,038 per tonne.
At present, rate of octroi duty is the highest in Mumbai compared to other cities. Among the important centres of non-ferrous trade, rate of octroi duty is one per cent in Navi Mumbai, up to 1.5 per cent in Pune, Ahmedabad and Baroda and nil in Kolhapur, Daman and Silvassa.
"It is a sad state that even units, which used to get its job work done in Mumbai and sell their finished products in the city, also prefer to go to units located outside. The main reason is the multiple effect of octroi - that is, first on raw materials, then again on semi-finished goods and finally on finished products if sold in Mumbai market," Mr Shah pointed out.
Added another trader: "If the situation continues to remain unchanged, there would be no other option for us and other manufacturing units but to shift the remaining trade outside the Mumbai octroi limits. Our request to BMC is to reduce the octroi to one per cent ad valorem."
As a matter of fact, if BMC whittles down octroi rate, there would be no revenue loss, but, on the contrary, it wouldincrease mainly due to the high value of metal prices quoted on daily basis internationally at London Metal Exchange, which has a direct bearing on domestic prices.
"In any case by next week, we are meeting the top authorities of the BMC in this regard," a director of BME added.
It remains to be seen if the traders manage to cut ice with BMC.
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