Seeks certification for inputs, fears misuse of licences

Our Bureau

New Delhi, Feb. 13The domestic steel industry is up in arms over the Duty Free Import Authorisation (DFIA) scheme introduced by the Commerce Ministry in its Foreign Trade Policy in May 2006.

According to officials of steel manufacturing companies, the scheme is liable to be misused by the trading community and, as a result, steel manufacturers face pricing pressure because of increasing duty-free imports.

On the one hand the scheme permits duty-free imports of inputs for manufacture of goods to be exported, while on the other the goods being exported do not require certification on the origins of the inputs. Moreover, these DFIA licences are transferable and even the transferee is entitled to duty exemptions including basic import duty, additional and special additional and education cess.

This creates scope for exporters to trade in DFIA licences leading to market distortion, industry officials explained. Steel companies want the Government to introduce certification for the input used in manufacturing if the exporters seek DFIA licences.

In the case of steel industry, according to industry estimates, currently around 60 per cent of steel imports are made by traders, and not the manufacturing companies, using DFIA licences.

The data available since the scheme was introduced in May last year and up to December shows that DEPB and Duty Drawback claims for steel have come down by around 25 per cent and 30 per cent respectively while the licence under DFIA has gone up by around 60, indicating that importers are taking this route to replace DEPB and Duty drawback, a senior industry official said, adding that steel imports through Mumbai Port alone has exceeded one lakh tonnes December 2006.

(This article was published in the Business Line print edition dated February 14, 2007)
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