Customs duty may be cut 5%

'Govt committed to reducing duties to Asean levels'.

The finance ministry is working on reducing India's peak Customs duty for non-agriculture products by 5 per cent to a level of 10 per cent in the next Budget.

"The government is committed to reducing duties to Asean levels and we are working on a proposal to reduce Customs duty by another 5 per cent," a finance ministry official said. Import duty in Asean countries was around 5-8%.

Officials said the buoyancy in Customs duty collections was expected to help the government make up for any possible loss in revenue. The move will also help negate the adverse impact of bilateral agreements India has had with some trading partners.

The move is in step with Prime Minister Manmohan Singh's recent statements that Customs duty will be brought down to Asean levels.

Singh has reiterated the government's commitment on a number of occasions and Finance Minister P Chidambaram has also supported the idea. If reduced, the cut will be the third 5-per cent reduction since January 2004.

In his Budget speech this year, Chidambaram had announced a 5 per cent cut, which put peak Customs duty at 15 per cent. In January 2004, Chidambaram's predecessor Jaswant Singh had announced a 5 per cent reduction in the peak duty to 20 per cent.

A reduction in peak Customs duty on non-agriculture products has been one of the key initiatives in the government's economic liberalisation programme which started in 1991, when the peak rate was 150 per cent.

The peak duty came down to 40 per cent in 1997-98 but rose marginally due to the imposition of a surcharge in the wake of the Pokhran nuclear tests. In its submissions to the World Trade Organisation, India estimated its average import tariffs at 34 per cent.

While peak Customs duty was proposed to be reduced, officials said the demand for reducing import tariffs for sectors like alcohol and automobiles was being discussed with industry bodies. "These are early days and we are just keeping track of industry's demands," an official said.

International car majors have been pressing for a lower import duty on automobiles imported by India and the US and the EU are pressing for lower tariffs for alcoholic beverages.