Tuesday, November 18, 2008

Government slaps 5% import duty on iron and steel

The government on Tuesday slapped a 5% import duty on specified iron and

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steel products and 20% duty on crude soyabean oil in a move aimed at safeguarding the interests of domestic industry.

While bringing cheer to the industry, the move is also expected to give a marginal relief to the government revenues as well. The government, which has cut indirect taxes to stimulate the economy in the budget and then later in the financial year including exempting crude oil from import duty has witnessed a downslide in its excise and customs duty collections. The collections declined by 5% in October, 2008.

The changes come into effect immediately, an official statement said adding that the refund based service tax exemtion scheme for exporters had also been simplified and the period to file refund claims extended to six months from present 60 days.

The decision to impose cutsoms duty on wide range of pig iron, semi-finished, flat and long category of products, comes in the backdrop of prices of these commodities declining in the international market in recent times. The import duty, however, falls short of industry expectations. They demanded a 15% duty on steel imports.

Domestic firms demanded protection against imports as steel prices dipped from a high level of Rs 45,000-50,000 per tonne to Rs 32,000-34,000 per tonne and there are apprehensions of cheaper imports from countries like China, Thailand and Ukraine that have built up huge inventories flooding India.
Similarly, 20% customs duty on soyabean oil has been imposed after intense lobbying by the soya processing industry, would lead to a marginal overall increase in the price table of vegetable oils in India. Most traders had already factored the duty into the prices they have been quoting over the last one week.

Even so, industry is hopeful it would improve margins of local soya processors, as well as give better price signals to farmers planning to sow rapeseed mustard and groundnut in the coming rabi season December onwards.

However, it is unlikely to have little impact on physical soyabean oil imports, which are negligible right now. Soya oil is anyway outpriced by palm oil, which remains the consumer's top choice. Currently, refined palm oil is selling in the wholesale markets at Rs 30/kg, while soya oil produced locally is available for Rs 41/kg.

At this price differential, palm oil is the consumer's favourite oil. This is one reason why processors were demanding a duty on palm oil so that it blunts competition for soya oil.

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