Government to review proposed customs duty cut on petrochemicals from Singapore

03-Jan-08

Objections from the department of chemicals and petrochemicals (DoCP) have driven the Indian government to review its decision to reduce Customs duty on chemicals and petrochemicals from Singapore to zero in the next three years. The DoCP has objected to the Cabinet’s recent decision of removing Customs duty on 69 polymer, chemical and pesticide items as it feels that opening up the chemical and petrochemical sector at a time when the industry is trying to gain a foothold, could be detrimental to the domestic industry. Customs duty cut was offered as part of additional sops offered to Singapore under the bilateral comprehensive economic co-operation agreement (CECA). This will result in a tariff decrease at a time when the government is also discussing such prospects with ASEAN nations. Earlier this quarter, the Union Cabinet had decided to move 555 items from the negative to normal list for trade with Singapore. The lists included 14 polymer items, 6nylon/polyester filament yarns, 17 chemicals and 32 pesticides. The government proposed to move polymer, chemicals and pesticide items into the normal track I list, while it proposed to move yarn to track II list. Under track I list tariff would come down to zero by 2011, while under track II, duties would come to zero by 2015. The import duty on polymers is at 5% in India, while in Indonesia, Malaysia, Thailand and China the rates are 10%, 25%, 15% and 7.8%, respectively. The DoCP recommends that retaining the items in the negative list or reverting to the normal track II. This would give the domestic industry time to prepare for international competition. Tariffs have already come down from a peak of 35% in 2001-02 to between 5-10% at present. For chemicals and pesticides, the import duty is 7.5% against 20% each in Indonesia, Malaysia and Thailand and 6.5% in China. Bringing it to zero may result into other countries routing their products through Singapore.