November 5, 2003	Wednesday	Ramazan 9, 1424

ISLAMABAD, Nov 4: The National Tariff Commission (NTC) during its public hearing here on Tuesday deferred a decision on the industry producing alkyd resin and allied chemicals for reduction in duty on raw materials used by them for protection against imports.

These chemicals are used in paints, textile auxiliaries, paper chemicals, water-based emulsions, etc.

The NTC chairman observed that the alkyd industry had already been allowed 3.5 per cent protection in terms of weighted average of custom duty. There was thus no anomaly. The contention that their product was being exported to Afghanistan also remained unproved.

Through reduction in duty on raw materials to 10 per cent, the industry in fact wanted the protection rate to be raised to 7.8 per cent in order to increase their profits, Dr Khilji observed.

While reassuring them about a sympathetic consideration of the request, he advised the industry to focus on reducing their cost of production and ensure sustained viability of their units through improvements in their operations.

It had been represented on behalf of the organized industry that the customs duty on the final product alkyd resin (25pc) was less than the custom duty on the import of its main raw material i.e. crude soyabean oil (1507.1000) and crude coconut oil (1513.1100) (31-32pc). These materials constitute as high a proportion as 46 per cent of the final product.

Initially, the industry representatives argued that the high duty put them at a disadvantage against the Indian exporters in Afghanistan.

Secondly, it was contended, sales tax, excise duty and custom duty was paid only by the organized sector, while the unorganized sector far outnumbering the former remained exempt from these by avoiding to get registered. As result, the five or so units of organized sector found it difficult to compete even in the domestic market.

It was for this reason that the unorganized sector had not come forward for removal of anomaly in the tax structure affecting the alkyd resin, etc., it was alleged.

If the duty was reduced, the five per cent margin availed of by them would go and the units of unorganized sector would find registration more profitable, thus benefiting the organized sector through improved competitiveness.

The representative of the paint industry — end-users of alkyd — observed that the two main units producing paints, namely, ICI and Berger, covered only 20 per cent of the market segment in spite of higher quality, albeit at much higher prices.

According to one participant, their share in the market might become more respectable should they start acting on the principle of economy of scale by reducing their prices.

Even so, the sales of paints had doubled during recent months and some of the units producing alkyd were even expanding their operations.

Moreover, representative of Delta Industries (Pvt) Ltd, Lahore, the main applicant, said that they wanted that the custom duty on oils be reduced from the present level to 10 per cent under a special SRO as had been done in the case of Oleo-chemical/Stearic Acid industry under SRO 358(I)2002 on June 15, 2003. As the quantity of coconut and soyabean oil used by the alkyd industry was only about 9,000 tons, reduction in duty as requested would not have any substantial effect on the revenues.

It might, on the other hand, be compensated by induction of unorganized sector into the organized sector.

It was pointed out by the NTC staff that the export was already zero-rated because the taxes paid on such products were refunded to the exporters. The real problem was that the cost of production of local industry was much higher than that of their Indian counterparts due to higher overheads including fabulous salaries charged by the top management.