Excise duty cuts to reduce logistics cost and boost exports


The reduction in excise duty on petrol by a record Rs 8 per liter and that on diesel by Rs 6 per liter, along with a cut on import duty on the raw material of steel and plastic and increased export duty on iron ore and steel intermediates announce by the government on Saturday will reduce logistics cost, promote the competitiveness of manufacturing and export of value added goods, exporters said on Sunday

“These measures will bring down the domestic prices of key inputs thereby softening inflation. This will also add to the competitiveness of the manufacturing and export sector and will further push value-added exports from the country. These proactive measures will also ease the logistics pressure and bring down the freight bill of the country as in some cases the same raw material was being exported from the country and subsequently being imported by the downstream users,”

A Sakthive, President, Federation of Indian Export Organisations (FIEO)

Leading Mumbai-based exporter and Chairman of Technocraft Industries, Sharad Kumar Saraf sharing a similar view said that the reduction in excise duty on petrol and diesel will reduce logistics costs and will support exports, particularly of commodities that are freight sensitive.

“Export duty on iron ore and semi-finished steel products like HR coils and bars already has the desired effect. Steel prices have started softening and this will have a significant positive impact on our engineering exports. The government must be complimented for such actions,” Saraf said.

Ludhiana-based Hand Tools Association President S C Ralhan too said the iron and steel industry should pass on the benefits to the engineering sector, particularly the MSME units, which are reeling under the impact of high iron and steel prices.

Plastics Export Promotion Council Chairman Arvind Goenka called it a welcome move that will help the plastic processors be more competitive in the domestic market for sure.

“India’s polymer production is much lower than consumption leading to polymer imports worth USD 15 billion in FY 2021. Polymer consumption is growing at a faster rate than the country’s GDP and India needs several new petrochemical complexes to achieve Atma nirbharta but what is important is that the proposed reduction in customs duty should not dissuade polymer producers from expanding capacity,” he said. On the other hand, he said, plastic processors are working on a low-profit margin due to imports of finished plastics (nearly USD 6 billion in FY 2021) at very low rates.

“The delta between polymers & finished plastics currently is 2.5 percent or nil in a few cases. Finished plastics imports under the India-ASEAN trade agreement from Thailand and Vietnam are at inverted rates. If the custom duty is increased on finished plastics as well, it will improve margins of processors thereby encouraging them to add capacity and produce quality goods using the latest technology,” Goenka added.

Further, Sakthivel said that similar measures need to be taken for some of the textile inputs as the rising prices are making it extremely difficult for exports of the value-added apparel sector to meet the increasing competition.

“Export duty on cotton and duty-free import of cotton yarn will help in domestic availability of these inputs at a competitive cost,” he said.

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