Government Drops Proposal To Cut Import Duty On Natural Rubber (26-Aug-2010)
The government has reverted back to its old stand on the issue of import duty on natural rubber and rejected any cuts from the high rate of 20% that is prevalent currently. User industries have been lobbying hard for the government to cut the duty to 7.5%, at least for a pre-specified amount of the commodity.
Various user industries including the tyre makers have been contending that since there was significant demand supply gap in the domestic market, 2,00,000 tonne of the commodity should be allowed to be imported at lower import duty. After consultations with the industry bodies, the government had earlier indicated that it might allow import of around 1,00,000 tonne of natural rubber at a lower import duty of 7.5%. The proposal however now seems to have been dropped.
Chairman of the Rubber Board of India Sajen Peter stated on Wednesday that the union commerce ministry has dropped the proposal of implementing any cut in the import duty of natural rubber from the present level of 20%. He said that such an assurance was obtained by a group of MPs from Kerala who met the Commerce and Industry Minister Anand Sharma on Wednesday.
The chairman said that the government has decided to rather implement the recommendations of an expert panel constituted by on a directive of the Delhi High Court to look into the demands raised by the organisations representing rubber consuming industries through a petition.
The expert committee had, after studying the cost structure of domestic and foreign rubber producers, recommended to retain the import duty at 20% level. However, it also recommended that the duty should be computed on average price of last three fiscals rather than that of the current year alone. It also suggested that a ceiling on duty be fixed at Rs. 20.46 a kg.
The committee further recommended that ceiling can be changed according to the change in average prices. What it means is that in times of surge in prices, the duty will be relatively low as average price would be brought down by lower prices in previous years. The vice versa would be true for times when prices crash. Thus, duty based on average price of three years will act as a buffer and protect the interests of both the domestic producers as well as the user industries.
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