Severalindustrial sectors like tyres, electronic hardware, electrical equipment andmedical instruments are suffering due to an unfavourable duty structure whichmakes Indian manufacturing uncompetitive, a FICCI survey revealed.
According to a survey by the industrial lobby on "Inverted Duty Structurein Indian Manufacturing Sector", imported raw material users in a range ofmanufacturing industry segments are in a spot due to inverted customs dutystructure that makes them uncompetitive against cheaper finished productimports and discourages domestic value addition.
Under the inverted duty structure, import duty on finished products are lowerthan on parts or components used in manufacturing of the parts.
The FICCI survey reveals that manufacturing segments that are suffering due toinverted duty structure are: pumps for liquids, tyres, electronic hardware,electrical equipment, medical instrument, aluminium and articles, and technicaltextiles.
The findings of the survey assume importance as India is now a part of a numberof regional or bilateral Free Trade Agreements (FTA) with many countries andgroupings, including Japan, the ASEAN and South Korea. These FTAs aim toprovide equal opportunity to Indian players in terms of market access.
However, the higher import duty on raw materials results in an inverted dutystructure that makes certain Indian manufactured goods (those dependent onimported raw materials) uncompetitive in both domestic and export markets, theFICCI survey said.
In addition to the duty anomaly created by FTAs, the survey notes that manytimes importers derive the benefit of lower duty or zero duty, due to somespecial exemptions such as nil duty on project imports and certain defencepurchases. However, domestic manufacturers are not eligible for any matchingconcessions to nullify the impact of such duty anomalies.
The FICCI survey recommended that domestic manufacturers should be provided alevel playing field vis-à-vis imports under FTAs and various duty concessionschemes.