Edible oil tariff value to be cut

The government has decided to reduce the tariff value for edible oil and the duty entitlement passbook scheme benefits for steel exporters while maintaining the present level of benefit for the textile sector.

The tariff value reduction, to mirror the fall in international edible oil prices, would help in reducing the landed price of the commodity.

Following the norms of the World Customs Congress, India has adopted a system of tariff value to avoid revenue losses due to price fluctuations and under invoicing. The tariff value is changed in case international prices move by 12-15 per cent.

The government is expected to notify the changes over the next few days following a meeting convened by Prime Minister Manmohan Singh today evening.

Finance Minister P Chidambaram and Commerce & Industry Minister Kamal Nath also discussed the issue of lowering DEPB rates for steel and garments.

Senior government officials said that the DEPB rates would not be adjusted on the basis of revenue considerations and that the level of assistance available to exporters in the pre-Budget scenario would be maintained.

But it was decided that the DEPB rates would be adjusted to the extent of any duty relief given.

This would imply a reduction in the rates for steel since customs duties on steel were reduced in the Budget. Value caps could also be fixed in respect of 32 steel items. However, rates for textiles are likely to remain the same since there was no reduction in customs duty in textiles.

"The broad principles of fine-tuning the DEPB for the remainder of the current fiscal year has been agreed upon. Details will be worked out tonight and announced by the Cabinet secretary tomorrow," Finance Minister P Chidambaram told reporters after the meeting.

Officials said that one of the options being considered is that for high duty items like edible oil, 25 per cent of the duty could be paid on the DEPB scrip and the balance through cash.

A section within the government was, however, of the opinion that there was no justification for providing any value limit for payment of duty for import of high duty items like edible oils.

The decision to adjust the tariff value in case of edible oil is being taken since DEPB is increasingly being used to pay import duty on the product in lieu of cash.

The department of revenue has been arguing against continuation of DEPB on grounds that it is based on the deemed export concept wherein exporters are claiming DEPB benefits even though they are using indigenous inputs.

The Commerce Department on the other hand has pointed out that all the export promotion schemes account for only 13.6 per cent of India's total exports of over Rs 2,91,582 crore.