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Electronic components manufacture -- Customs duty waiver to be deferred

Hema Ramakrishnan

NEW DELHI, Oct. 29

THE Finance Ministry is set to defer the proposed move to accord full customs duty waiver on raw materials manufactured by the chemical industry and capital goods used in the production of electronic components till the next fiscal.

Senior officials said that though the Finance Ministry is mediating to iron out inter-Ministerial differences -- specifically from the Industry Ministry and the Department of Chemicals and Fertilisers -- on the issue, the implementation of the hardware r eport would have to wait till the next Budget.

Meanwhile, consequent to a decision taken at a meeting convened by the Finance Secretary, Mr P.G. Mankad, earlier this month, the draft Cabinet note on the proposal to usher in a zero duty regime on 206 additional raw materials and 342 additional capital goods had been forwarded to the two Ministries which have expressed their reservations on the move.

Imports of 135-odd raw materials already attract low rates of duties. The Ministry of Information Technology has sought a complete duty exemption on 548 items as well, to boost the performance of the hardware sector.

The Department of Chemicals and Fertilisers and the Industry Ministry have repeatedly pointed out that the proposed zero duty regime would adversely impact domestic chemical and capital goods industry.

The raw materials include copper clad laminates, phosphoric acid, polypropylene, red phospher, barium bromide, sodium aluminate, zinc wires, silver powder, copper plating salts, photo polymer films and copper anodes.

The Revenue Department, on its part, has expressed concern on two fronts -- the losses on account of a duty reduction and the problems associated with end-use notifications. Officials reckon that there is considerable scope for misuse of end-use notifica tions. The contrary view, however, is that procedures stipulated are quite stringent and misuse, if any, can easily be detected.

Mr Mankad is understood to have asked the Industry Ministry and the Department of Chemicals and Fertilisers to firm up their views within a fortnight.

``Presuming that the differences are sorted out, the informal understanding is that the proposal would be implemented as a part of next year's Budget package for the electronics and IT sector'', said officials. Hardware exports are targeted at $10 billio n by 2008 against the software export target of $50 billion.