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Tuesday, Feb 03, 2004

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Rolling back of customs duty — Picture tube makers fear inverted duty structure

Richa Mishra
K.R. Srivats

New Delhi , Feb. 2

WITH less than a month to go before Thailand Free Trade Agreement (FTA) comes into force, some colour picture tubes (CPT) and colour TV (CTV) manufacturers are upset with the Finance Ministry's recent decision to roll back the customs duty for glass parts, used for manufacture of picture tubes.

Players such as Hotline and Samtel Color are worried that the latest decision would only create an inverted duty structure for the industry, once the FTA is operationalised.

The Finance Ministry had recently rolled back the customs duty on glass parts from 10 per cent to 20 per cent, barely a week within its move to cut the duty to 10 per cent. "The issue is not how much the duty should be reduced. The main issue is how to avoid a situation of inverted duty structure, which would lead to the industry becoming uncompetitive," Mr V.N. Masaldan, Managing Director, Hotline Teletube & Components Ltd, said. An official from Samtel Color said that the latest move of the Finance Ministry would bring profit margins of domestic picture tube manufacturers under pressure. "By reversing the duty to 20 per cent, the Government has created a situation where glass from domestic manufacturers would be costlier and this would create some pressure on the margins of the tube industry," the official told Business Line.

In fact, many picture tube and television manufacturers have been consistently making a case for lowering the duty on inputs, in order to make domestic manufacturing competitive. Currently, imports of glass parts, CPTs and CTVs attract a uniform 20 per cent basic customs duty. The manufacturers point out that from March 1, following the FTA with Thailand, the import duty on CPT and CTV would come at 10 per cent, while its input, glass parts, would attract a customs duty of 20 per cent. Hence, this would lead to a situation of an inverted duty structure.

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