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Customs duty on fuel oil should go: ICMA

Our Bureau

CHENNAI, Feb. 4

THE Indian Chemical Manufacturers' Association (ICMA) has called for abolishing the 30 per cent customs duty on fuel oil used in captive power plants.

Speaking at a seminar on `Chemical Industry in 21st Century - New Approaches', ICMA's President, Mr. S. Subramanian, said the high cost of power was ``a great burden'' on the chemical units.

Captive generation of power was cost-effective until recently, but due to the increase in crude oil prices from $8 per barrel to about $28.5 per barrel, the cost of LSHS and furnace oil has gone up substantially, he observed. This, he said, had resulted in increase in cost of power generation by nearly Re. 1 per unit.

Mr. Subramanian further wanted ``cheap financial resources'' to be made available to the chemical industry for the purpose of modernising the plants. ICMA had suggested to the Union Government that excise duty collected for a period of two years from a m anufacturing unit be allowed to be utilised by the unit for funding modernisation as an interest-free loan. This amount can be repaid after a moratorium of three years in five instalments, he said. He also wanted the Government to negotiate with the IBRD and other agencies soft loans for modernisation.

Mr. Subramanian also requested that the import tariffs on chemicals should be raised to bound levels (maximum level permissible under the WTO agreements) and any reduction in tariff should be backloaded over a period of 20 years. Moreover, ``High volatil ity in prices is one of the major problems and it is important to have an effective trigger mechanism to respond to steep fall in international prices or when materials are dumped at very low prices into India.''

The Indian chemical industry contributes 19 per cent of the gross revenue in customs and excise. It adds a total of Rs. 1.2 lakh crores of value to India's GDP, Mr. Subramanian said.

However, India contributes only 1.5 per cent to the world's chemical output and has only five per cent of the share of the Asian chemical output, he said.