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K.R. Srivats
Harish Damodaran

New Delhi , Dec. 18

AFTER vanaspati and acrylic yarn makers, it may well be brewers who would be queuing up next to set up manufacturing facilities in Nepal to service the large Indian market. The reason: the Finance Ministry's decision to exempt beer imported from Nepal from the payment of countervailing duty (CVD).

Beer, like all alcoholic beverages, is currently not subjected to any Central excise, since its taxation falls under the purview of State Governments. In the case of imported liquor, there is no question of State Government levying excise, as its manufacture takes place outside the country.

In order to create a level playing field for domestic brewers and distillers, the Centre imposes a CVD on all imported alcoholic beverages, which is fixed at a level equal to the average excise duty levied by the States.

In the 2003-04 Union Budget, the CVD was set at 75 per cent on wine and beer with c.i.f. (cost, insurance, freight) value not exceeding $25 per case, 50 per cent on c.i.f. value between $25 and $40 per case and 20 per cent on c.i.f. value exceeding $40 per case. The 50 per cent and 20 per cent slabs are, however, subject to a minimum CVD incidence of $37 and $40 per case.

But following the Finance Ministry's latest move, if a UB or a Mohan Meakins were to set up a brewing unit in Nepal, beer imported from there will not attract the above CVDs. In other words, that would make Nepal a manufacturing haven for beer companies, both foreign and Indian.

It remains to be seen whether a similar treatment would be extended for wines and spirits as well.

On vanaspati, domestic manufacturers have been crying hoarse over the past few years due to the non-level playing field vis-à-vis imports from Nepal. Under the Indo-Nepal Trade Treaty, vanaspati imports of up to one-lakh tonnes at nil duty is allowed annually from Nepal.

Indian manufacturers have complained that Nepalese vanaspati makers have been importing crude palm oil (the main raw material) at zero duty, while they have to fork out 65 per cent basic customs duty on the same. And since the imported finished product from Nepal (vanaspati) attracts no duty when it enters India, manufacturers here are placed at a disadvantage.

A similar situation exists for acrylic yarn as well, where both domestic and foreign players have been using Nepal as a low-duty manufacturing base for servicing the Indian market.

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