Cut in soda ash duty to hurt domestic interests

Rajeev Jayaswal

New Delhi, May 16: THE soda ash industry has accused the government of having relented to pressure from the United States (US) while reducing import duty from 38.5 per cent to 20 per cent in the Budget.

US Secretary of Commerce William Daley and US trade representative Charlene Barshefsky, in a joint letter addressed to Union Commerce Minister Murasoli Maran, had threatened that the US would deny certain duty-free imports from India under the generalised system of preferences (GSP) unless US soda ash is given “an equitable and reasonable access to India’s market.”

Stating that the US would be the biggest beneficiary of customs duty reduction in the Budget, the Alkali Manufacturers’ Association of India said: “The American producers of natural soda ash have been exerting considerable pressure on the Centre for a duty reduction.”

Supporting the demand of the industry, Gujarat Chief Minister Keshubhai Patel, in two separate letters addressed to Finance Minister Yashwant Sinha and Minister of Chemicals and Fertilizer Sukhdev Singh Dhindsa, urged them “to save both soda ash industry and the livelihood of over 10 lakh people.”

Over 95 per cent of the installed capacity of soda ash is being produced in Gujarat.

In his letter to Sinha, Patel said: “As you are aware the reduction in soda ash import duty would result in a net cumulative impact of 19.5 per cent. Hence, the imported soda ash would be much cheaper. This drastic reduction would have an adverse impact on the domestic soda ash industry.”

The total import duty on soda ash was 38.5 per cent (35 per cent basic custom duty and 10 per cent surcharge on basic duty).

The industry is already suffering from over capacity. Soda ash producers — including Tata Chemicals, Gujarat Heavy Chemicals, Saurashtra Chemicals, DCW, Travancore Alkalies & Chemicals and Nirma — have together a production capacity of 18 lakh per tonne per annum, whereas total domestic consumption is 14 lakh tonne.

Representing the case of soda ash industry, the Confederation of Indian Industry said the sudden decrease in import duty would adversely affect the domestic companies. “The Centre should reduce it to 30 per cent in this Budget and gradually decrease the import duty to 20 per cent in next two years,” a CII official said.

There are two options available to safeguard the interests of soda ash industry. The first and preferred option is to increase the customs duty from 20 per cent to 30 per cent. The other option is to initiate anti-dumping measures, it said.