The Hindu Business Line : Lahiri panel proposes uniform duty for refined oil products

It recommended that the logic of harmonisation and of not having an inverted duty structure argues strongly in favour of increasing the duty rate on vanaspati to 72.5 per cent from the current 30 per cent.

Mumbai, Feb. 21

THE nominal duty differential between crude and refined oils should be reduced to 7.5 per cent and fixed uniformly at 72.5 per cent for all refined products, except soyabean, the Lahiri Committee has recommended.

It also recommended that the logic of harmonisation and of not having an inverted duty structure argues strongly in favour of increasing the duty rate on vanaspati to 72.5 per cent from the current 30 per cent.

For stability of the tax regime, the duty rates should be kept unchanged for a period of five years, the report argued.

The committee was set up late last year under the chairmanship of Dr Ashok Lahiri, Chief Economic Advisor to Ministry of Finance, to examine the trend and developments relating to supply-demand and prices of edible oils and to suggest rationalisation of excise and customs duties.

On the question of duty-free vanaspati imports from Nepal and Sri Lanka hurting domestic industry, the report notes that a durable solution lies in the convergence of external tariffs in the entire South Asia Free Trade Area region making it a customs union; and until then, given the Indian tradition of living by its international contracts, a temporary solution lies in vigorous outward investment by Indian oil refiners in Nepal and Sri Lanka, and rigorous enforcement of the rules of origin.

Suggesting that refined oils are non-essential products, the committee said that excise duty on refined oils should be reviewed at the time of review of excise duty on processed foods.

G. Chandrashekhar reports: At a time when the oilseeds and vegetable oil sector as a whole is beset with serious structural and other issues, it is unfortunate that the Lahiri Committee confined itself to examining fiscal issues. Duties and taxes are certainly not high on the priority list for strengthening this beleaguered sector and should have been the last thing to engage the attention of anyone in the government.

Instead of taking a holistic view of the entire sector, after consultation with all stakeholders and concerned Ministries, the committee seems to believe that tinkering with fiscal imposts would deliver what is necessary for the sector. The issues confronting this sector are clear and well known.

Non-trade, non-tax and non-price initiatives are the way forward. It is possible that the committee's terms of reference were set out because of strong industry lobbying.

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