The average customs collection rate for selected import groups has fallen by 13 per cent from 44 per cent in 1991-92 to 31 per cent in 1996-97.
As the economic survey points out, the drop in the rates is evident for all major product groups except petroleum, oil and lubricants.
It is also argued that though the dispersion of rate, as measured by the difference between the maximum and minimum rates, is reduced it is still very big. This has lead to distortion of incentives and misallocation of resources.
The total collection rates have shown an improvement in 1996-97 at 31 per cent against 29 per cent for 1995-96.
This improvement has been led by chemicals and capital goods primarily.
The groups which have shown worse collection in 1996-97 over 1995-96 include food products and metals while man made fibres has remained stagnant.
The latter has however shown a sharp improvement over 1994-95 when it doubled to 36 per cent in 1995-96.
The collection rate is defined as the ratio of realised import revenue (including additional customs duty) to the value of imports of a commodity.
Because of numerous exemptions, the declared tariff rate does not reflect the nominal level of protection.
Collection rates are better indicators of nominal tariff protection than the declared tariff rates.
The actual incidence of duty is lower than that notified in the tariff schedule.
The average collection rate fell when peak rates were reduced from internationally unheard of levels of more than 150 per cent.
The fall in average collection rates was however much less than in the peak rate.
The higher the protection rate for a particular sector the more disadvantaged it is for other sectors. For instance a 45 per cent rate for metals is 6 percent higher than that for capital goods.
This puts capital goods sector at a disadvantage and possibly bestows negative protection.
