The chemical department in the ministry of chemicals and fertilizers is working on new model for imposing proposed cess referred to as chemical upgradation and innovation cess. The aim is to collect funds for establishing a Technology Upgradation and Innovation Fund for the industry.
Amidst stiff opposition from the industry, the government plans to finetune the cess model and submit it to the planning commission for approval. According to officials close to the development, the cess is likely to be announced figure as a budget proposal in 2014-15.
As per the new proposal, it will be contributory model where government will grant some seed money and then the industry will have to make up for the rest of the fund with cess. Further the amount of cess is proposed to be collected along with excise duty from the factory.
The original proposal as per the National Chemical Policy , envisaged to impose a chemical upgradation and innovation cess at the rate of 0.5% ad valorem on chemical industries. Now under the revised plan, the cess has been brought down from 0.5% advalorem to 0.1% on chemical production per company. An official source said this proposal was in line with the cess imposed by the ministry of new and renewable energy to set up a clean energy fund or as with the case of the telecom fund of the department of telecommunications; in fact, DoT imposes a five% cess on an operator’s gross revenue, they added.
However, the chemical industry is opposing the idea at this stage, saying its profitability is already badly hit from both lower exports and a glut at home.
Officials say the domestic market for basic chemicals is saturated, while companies are not equipped to upgrade their factories into manufacturing of specialised chemicals, which do have a lot of demand and less dependence on feedstock. They explained the industry could avail of funds to increase research and development (R&D) spending, from the existing one to two% of their total expenditure to five to six%.
The R&D spending could focus on aligning technology, demand, standards and regulations after examining emerging technologies and trends, they said. Another focus area could be creation of intellectual property rights (IPR) through synergy between academic centres, manufacturers, R&D centres, etc.
“The idea is to strengthen links in the complete value chain from research to IPR generation, product design, development and commercialisation, so as to become internationally competitive," they said.
