HANSIKA
PAL
NEW DELHI: The fertiliser industry has urged the ministry of chemicals
& fertilisers to remove import duty on plant and machinery for setting
up new grassroot and expansion projects. The industry has also sought
for removal of duty on imported naphtha and furnace oil.
According
to the Fertiliser Association of India (FAI), the import of plant
and machinery for setting up new grassroot projects attract a basic
duty of 5 per cent in addition to the countervailing duty (CVD) of
16 per cent, putting the effective rate of custom duty on such imports
at 21.8 per cent.
In
its recommendation to the government, FAI has asked for abolition
of the import duty as that would reduce the project cost and make
it competitive. The industry feels that levy of duty increases the
cost of production of fertilisers which in turn leads to higher subsidy
payments on urea under the administered pricing scheme.
The
import of plant and machinery for undertaking expansion and revamp
of existing plants attract a basic custom duty of 5 per cent in addition
to CVD of 16 per cent and special additional duty (SAD) of 4 per cent.
FAI has sought the withdrawal of such duties as continuance of such
high import duties will undermine the viability of these projects
in the eventual liberalised regime.
The
industry points out that duty on imports of naphtha and furnace oil
used for manufacture of fertilisers is nil whereas furnace oil used
in generation of captive power attracts a duty of 20 per cent and
a CVD of 16 per cent, yielding an effective rate of 39.2 per cent.
"By
making an artificial distinction between feedstock and fuel and thereby
charging duty of 39.2 per cent, the government's subsidy bill increases
as the cost of fertiliser increases. Zero duty should be charged as
long as consumption is ultimately for production of fertilisers,"
says Uttam Gupta, additional director (economics), FAI.
With
regards to import duty on urea, FAI feels that as long as the imports
are regulated by state trading enterprise, the current duty rate of
5 per cent is welcome but if the import of urea is made free, the
government should set the duty rate at a reasonably higher level.
