The Telegraph
Since 1st March, 1999
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Import duty cut to beat price heat

New Delhi, Jan. 22: In a bid to control runaway inflation that is now over 6 per cent, the Congress-led government late tonight reduced customs duty on a raft of items used in manufacturing such as cement, stainless steel, alloy steel, tin, aluminium, copper, zinc and a range of chemicals.

“We cut duties on these goods as they have widespread use and form a key to the rapid infrastructure development programmes we are witnessing here,” said a senior finance ministry official.

The duty cuts, including that on project imports and capital goods, are expected to bring down costs and check profiteering by the local industry.

The maximum cut is on Portland cement where duty has been reduced from 12.5 per cent to nil. This is expected to put the brakes on cement prices, which have more than doubled in the last two years.

The finance minister recently said at the Ficci annual general meeting that supply side constraints imposed by industry were ratcheting up the inflation rate.

“The duty cuts will be reviewed some time later when the budget is prepared ... if we find things have improved, we will see,” government officials said. Duty cuts are used by the government to raise supplies and reduce prices just as increase in interest rates are used to reduce money supply and push up prices.

Officials said duty on specified capital goods and their parts have been reduced from 12.5 per cent/10 per cent to 7.5 per cent; on project imports from 12.5 per cent/10 per cent to 7.5 per cent. Airport development and metro rail projects would now be included in project imports and taxed at the rate of 7.5 per cent.

Duty on inorganic chemicals, like halogens (fluorine, chlorine, bromine, iodine), sulphur, carbon, hydrogen, rare gases (nitrogen, oxygen, silicon, phosphorus) and alkali metals (sodium, calcium etc) have been reduced from 10 per cent to 5 per cent.

The rates on primary and semi-finished forms of copper, aluminium, zinc, tin, and other base metals have been cut from 7.5 per cent to 5 per cent; on ferro alloys, stainless steel and other alloy steel from 7.5 per cent to 5 per cent; and pipes and tubes of aluminium, copper and zinc (heading 7907) from 12.5 per cent to 7.5 per cent.

The duty on refractories is down from 7.5 per cent to 5 per cent and specified raw materials of refractories from 10 per cent/7.5 per cent to 5 per cent.

Officials said the notification took effect tonight and businesses could start importing at the reduced rates from now.

The government wants to check the rising price graph as it will be facing elections in four states. A price rise could be an embarrassing political weapon in the hands of the Opposition.

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