The Hindu Business Line : Centre resorts to tariff value to fight inflation

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Centre resorts to tariff value to fight inflation

Harish Damodaran

Effective duty for importers lower

Tariff v actuals
Imported crude palm oil on Tuesday was $502 a tonne c&f Indian ports. Against this, the tariff value is $447.
Tariff value on crude soya is $580 a tonne while landed price is $665.

New Delhi , Nov. 7

It was originally intended as a tool for tackling under-invoicing by edible oil importers. But now, the "tariff value" has become a handy instrument for the Centre to fight inflation.

When the Finance Ministry began fixing tariff values for edible oils from August 2001, the main objective was to check rampant under-invoicing by importers.

Reverse situation

The Ministry, then, started unilaterally determining the tariff value or base price on which import duties were to be computed.

This situation has, however, reversed now. On Tuesday, imported crude palm oil (CPO) was quoted at $502 per tonne, cost & freight (c&f) Indian ports.

As against this, the tariff value on CPO is only $447 per tonne.

Currently, the effective import duty on CPO is 78.2 per cent (70 per cent basic duty plus 2 per cent education cess on 70 plus 4 per cent special additional duty on 170).

If the 78.2 per cent duty were levied on the actual landed cost of $502 per tonne, the duty liability for the importer would have been $392.56 per tonne.

But as the duty is being computed on the tariff value of $447 per tonne, the importer is paying only $349.55 per tonne. Effectively, therefore, he is coughing up a duty of only 69.6 per cent and not 78 per cent.

Lower value

Similar calculations can be made for crude soyabean oil and RBD (refined, bleached and de-odorised) palmolein.

The tariff value on crude soya, at $580 per tonne, is much lower than the current landed import price of $665 per tonne, with the corresponding numbers being $484 and $527 per tonne for RBD palmolein.

If the imported consignments were assessed at the landed cost, the effective duty on crude soya oil would be only 44.3 per cent and not the official 50.8 per cent (45 per cent basic duty plus 4 per cent special additional duty on 145).

Likewise, the effective import duty on RBD palmolein on the current landed price works out to only 81.6 per cent, against the official 88.8 per cent (80 per cent basic duty plus 2 per cent education cess on 80 plus 4 per cent special additional duty on 180).

By leaving tariff values unchanged even in the face of spiralling global prices, it is the Centre that is now resorting to under-invoicing.

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