The Hindu Business Line : Govt cuts duties on SAFTA imports

New regime
Level of duty ranges from five per cent to 117.5 per cent
Move expected to give boost to intra-SAARC trade
Many items remain in sensitive list to protect domestic industry/farmers

New Delhi , July 3

The Government has effected the first tariff reduction under the agreed phased trade liberalisation programme (TLP) of the agreement on South Asian Free Trade Area (SAFTA).

Accordingly, the Finance Ministry has with effect from July 1 reduced Customs duties on imports of items under nearly 380 tariff lines from Pakistan and Sri Lanka (non-least developed contracting States).

The level of duty notified by the Government for these items ranges from five per cent to 117.5 per cent.

A similar measure has been taken in respect of items under these 380 tariff lines for imports from the least developed contracting (LDC) States of Bangladesh, Bhutan, Maldives, and Nepal. The duty ranges from five per cent to 100 per cent. The Finance Ministry's move is expected to give a boost to intra-SAARC trade in the coming days.

The items that have seen a cut in Customs duties include motorcars, motorcycles, golf carts, pharmaceutical products, fertilisers, paints, routers, modems, iron and steel, a host of textile items, certain edible vegetables, cut flowers, cocoa and cocoa preparations, and lactose, maltose and sugar syrup.

For new motorcars imported in completely knocked down (CKD) form, the Customs duty has been pegged at 12.5 per cent for imports from Sri Lanka and Pakistan and 10 per cent from Bangladesh, Bhutan, Maldives, and Nepal.

However, imports of new motorcars in any other form from Pakistan and Sri Lanka would attract 50 per cent Customs duty and 40 per cent in respect of imports from Bangladesh, Bhutan, Maldives and Nepal.

Imports of new cars under the general category attract 60 per cent Customs duty and 100 per cent for used cars.

A similar duty regime has been put in place in respect of imports of new motorcycles from these countries.

While a CKD version would attract 12.5 per cent Customs duty for imports from Pakistan and Sri Lanka, the duty would be 10 per cent for imports from the LDC States. Motorcycle imports in any other form would attract duty of 50 per cent and 40 per cent, respectively.

To protect the interests of domestic industry/farmers, the Government has kept 868 tariff lines in the sensitive list for non-LDCs and 743 in the sensitive list for LDCs. TLP would not be applicable on items in the sensitive list.

Among the items that have been placed in the sensitive list in respect of non-LDCs are skimmed milk, whole milk, cauliflower, carrots and turnips, sweet corn, oranges, onions, green tea, black tea, durum wheat of seed quality, soyabean of seed quality, crude groundnut oil, aviation turbine fuel (ATF) and fuel oil, liquefied petroleum gas, toothpaste and toothpowder, household and laundry soap, carpets, bangles, imitation jewellery, retread tyres, tiles, colour TVs, set-top boxes, and voltage stabilisers.

The items placed under the sensitive list for LDCs include fresh onions, arecanut, lemon, chilly, poppy, wheat, flakes, groundnut seeds, refined palmoil/palmolein, edible grade groundnut oil, naphtha, ATF and fuel oil, retread tyres, colour TVs, and set-top boxes.

As per the TLP under SAFTA agreement, in two years from the date of coming into force of the agreement, the non-LDCs - India, Pakistan, and Sri Lanka - would bring down tariffs to 20 per cent, while LDCs would have to bring them down to 30 per cent.

Non-LDCs would then bring down tariffs from 20 per cent to 0-5 per cent in five years (six years for Sri Lanka), while LDCs would be required to do so in eight years.

Testing norms

Significantly, the EU and India are yet to evolve common testing protocols and standard markers for identifying `authentic' basmati. "In the absence of commonly accepted testing norms, this provision gives scope for unilateral action. This could affect our exports,", the sources added.

As of now, there are six `traditional' (Basmati-370, Basmati-386, Dehraduni, Taraori, Basmati-217 and Ranbir Basmati) and two `evolved' varieties (Pusa Basmati-1 and Super) qualifying as basmati for export from India. Pakistan has likewise notified four varieties: Kernel and Basmati -70 (`traditional') and Super and Pusa (`evolved').

The country annually exports around 1.8 lakh tonnes of basmati rice to the EU, which is worth over Rs 500 crore. Roughly 40 per cent of this is accounted for by Tilda Riceland Ltd. The other players include Amira Foods, Sunstar Overseas, LT Overseas, Bush Foods, Picric Ltd, Pepsi Foods and Satnam Overseas.

"Mandatory DNA analysis and authenticity certification could in future be extended to other products, where there are geographical indication-based claims. Today, it is basmati; tomorrow, it can be Darjeeling tea or Malabar pepper. All these would eventually raise transaction costs,", the sources pointed out.