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How India’s high import duties are playing spoilsport for Make in India.

Date: 26-11-2022
Subject: How India’s high import duties are playing spoilsport for Make in India
Meant to protect India’s domestic industries, the country’s import tariffs are now hurting various sectors. Experts suggest that this would hamper India’s chances of becoming a $5-trillion economy by FY27, as estimated by the International Monetary Fund (IMF).

A strong domestic manufacturing sector has to be built before the country can aim to be an export powerhouse. So, making crucial raw materials cheaper is the way to encourage manufacturing, experts say. However, in India, high import duties on steel, polymers, cotton and aluminium, among others, are making it difficult for manufacturers to be competitive globally. It is especially painful for the cash-starved MSME sector as the duties can range between 5% and 17%, according to various experts.

How much tariff to impose, which sectors require it, and the outcome of such measures have always been a source of debate. VK Agarwal, MD of Shashi Cables, a manufacturer of aluminium conductors used for transmission of electricity, lays out the problems with such tariffs. Let’s take the case of a base metal such as aluminium where India is a strong player because it has rich deposits of bauxite and coal required to make the metal. This helps India offer the lowest aluminium manufacturing cost in the world. “Despite having all the natural resources in India, the primary producers of aluminium charge us more. There is no justification for that,” he says.

Agarwal, however, explains that is not always the case. “If they export, they have to do it at the LME benchmark. But even when they sell it to us, they calculate the price using a formula that multiplies the price with duty in dollars. They do this even though it has nothing to do with customs duty, as it is only applicable on imported products. However, they argue that if we had imported the metal, we would have paid this amount,” he says.

This constrains the finances of domestic companies that use aluminium to make various products. On top of this, the government imposes an import duty of 7.5% in a country where production capacity is 4 million tonnes and sales is less than 2 million tonnes. “Why should there be any import duty at all on aluminium metal? If there is no import duty, the price in India would have been about 8% lower. The government is helping them earn more from the domestic market through the duty,” says the MD of Shashi Cables, adding that the duty on products made with raw materials available in India should be zero.

When international prices go down, these manufacturers ask the government to levy another 10% duty. The manufacturers claim they will not be able to survive otherwise. “They ask the government to impose anti-dumping duties even though they are quite comfortable and this is a product of India. They have a lot of muscle power.”

Source Name:-Economic Times

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