The Hindu Business Line : Hoda panel seeks industry feedback

The Anwarul Hoda Committee on Inverted Duty Structure has asked Ministries and industry associations to provide information on specific cases of duty inversion arising on account of implementation of tariff concessions under any regional trading arrangements (RTAs).

Industry has also been asked to give feedback on any duty inversion that is likely to result from any of India's ongoing negotiations with its trading partners.

Sources said that the response has been sought in a format specified by the Government and that some of the industry associations, like Assocham, have already submitted their views on the matter.

The Prime Minister's Office (PMO) had constituted the committee under the Chairmanship of Mr Anwarul Hoda, Member of Planning Commission, to look into the problem of inverted duty structure arising out of various trading arrangements in place and under consideration and also suggest ways and means of addressing the problems.

With the implementation of RTAs, it was observed that in some cases while the finished product was being imported at a lower duty (due to tariff preferences), the related raw material or input was imported at a higher rate of applied MFN duty.

The situation gets aggravated if the related inputs/raw materials cannot be sourced from the RTA partner and the industry needed to import from the other country on payment of higher duty, leading to inverted duty structure.

Assocham has, in its response to the committee, taken up the cases of automobile components, glass parts and chemicals, rubber goods, tiles and manmade fibres.

On automobile components, it has been submitted that there is concern about the possibility of automobile component manufacturers shifting base to Thailand for exports to third country markets.

"India's auto component industry is globally competitive. However, the comparative advantage that Indian industry enjoys may be marred by the special tariff dispensation under the FTA with Thailand."

As regards glass parts and chemicals, which are used in production of colour picture tubes (CPTs), it has been highlighted that they can be imported into Thailand sans duty, whereas they attract duty of 15 per cent in India.

"Since India is a major CPT supplier to the global television manufacturing industry, the duty differential has already hit local industry. Not only that, under the early harvest scheme under the Indo-Thai FTA, the import duty on CPT will be reduced from 6.25 per cent currently to nil, with effect from September 2006, widening the duty differential between inputs and the finished products further," Assocham told the committee.

On tiles, it has been submitted that inverted duty structure still exists despite rationalisation of Customs duty on raw materials for the tile industry in the Union Budget 2006-07.

While Customs duty on raw materials such as ceramic colours, frit and ceramic rollers ranges from 12.5 per cent to 7.5 per cent, the finished product attracts 5.37 per cent import duty.

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