Govt weighs junking customs relief in ‘Make in India’ push

New Delhi: India could in the upcoming budget remove customs duty exemptions for certain imported components such as bulk drugs used to manufacture certain insulins, raw material to produce rough lab grown diamonds, plastics used to manufacture optical fibre, components used in LED and LCD TV panels and goods required for coal mining and power generation to boost their local manufacturing.The government is examining the data on planned investments, domestic production and capacity of 31 products where conditional customs duty rates and exemptions are set to expire by September 30, 2025. The finance ministry has sounded out the concerned ministries and departments and sought their inputs.

At present, the basic customs duty on these products is 0-5%.

“The exercise to review customs duties is going on to decide whether the exemptions should continue or be allowed to lapse. We have sought input from industry,” said an official.

India has been phasing out conditional exemptions for inputs used in local manufacturing as part of a larger plan.

The exercise is also being carried in the backdrop of plans to increase India’s share in global value chains.

In the previous budget, the basic customs duty on ferro nickel and blister copper was removed to reduce the cost of production of steel and copper. Similarly, the duty on import of X-ray tubes and flat panel detectors for manufacturing medical X-ray machines was lowered in line with the Phased Manufacturing Programme for medical devices launched in 2021.

“One of the key considerations for the government would be to assess the impact on ‘Make in India‘ initiative including the quantum of value addition taking place in the country,” said Pratik Jain, partner, PwC India.

Products across sectors

Currently, certain life saving medicines and their esters, chemicals used to manufacture telecom grade optical fibre, shuttle less looms, seeds used to make rough lab grown diamonds and vessels-which are under review-are exempt from basic customs duty.

Experts said the government will consider the changing geopolitical dynamics while taking a call on the exemption, especially treating imports from the US. Moreover, any duty increase for goods which are crucial for MSMEs would have to be carefully done, they said. The other products which are being reviewed include certain weaving, knitting and sewing machines, components of wind operated electricity generators, shuttle less looms, components used to manufacture ferry boats, cruise ships and certain tyres and auto parts imported by testing agencies.

“The phasing out of conditional notifications of customs will help in domestic industries Make in India for products which were till now being imported from overseas and are critical for businesses in India. Since the finance ministry has published the phasing out schemes sometime back, the industries have had time to prepare for this transition,” said Bipin Sapra, partner, EY.

“There are concessional duties on some products. As long as imports don’t threaten domestic production, they can be allowed,” said a representative of cotton textile industry, adding that the import component in textiles is low.