Times of India

Durables industry worried over FTAs and cheap imports

RATNA BHUSHAN, TIMES NEWS NETWORK

7 FEBRUARY 2005

NEW DELHI: Already reeling under soaring material costs and tight margins, the consumer durables industry has raised concerns about cheap imports from neighbouring countries.

While a free trade agreement (FTA) with Thailand has already been formalised by the government, a similar agreement is expected to be signed with Singapore.

Industry officials said while they were not against the implementation of FTAs, they wanted a fiscal environment that would protect domestic players.

"An inverted duty structure arising out of FTAs with other countries is hurting us," said an industry official. Under the FTA with Thailand, customs duties on imports from Thailand will be halved from the existing 12.5 per cent to 6.25 per cent from September 1 ’05. In September ’06, customs duties will become 0%. "While a CTV set can be imported from Thailand at 12.5 per cent duty, its inputs attract customs duty of 20 per cent. Customs duties on inputs should not be higher than customs duties on finished products," said an official representing industry body CETMA.

"We are under pressure to reduce manufacturing costs to boost market penetration. But it’s not possible with 20 per cent customs duty on inputs like colour picture tubes, glass parts and tape decks," said another official. In India, penetration level of products such as CTV sets is less than 20%. In contrast, penetration of CTVs in China is 96 per cent.

CETMA has recommended that customs duty on all consumer electronic and inputs be brought down to 10 per cent in this year’s budget. Industry has also recommended that customs duties on basic raw materials like plastic, copper, steel and lead be brought down to 0 per cent from the existing 10 per cent to 20 per cent.

Japanese durables firms like Sony, Daikin, Hitachi and Matsushita have either stalled or cut down manufacturing operations in India and opted to import.