ISLAMABAD, March 27: Can the customs duty on intermediate goods derived from an industrial product be reduced, irrespective of the present system of four slabs, levied?

This issue was raised by a company at a public hearing held by the National Tariff Commission here on Saturday to consider the request from the producers of raw material of sulfonic acid, an input of detergent powder, for protection.

The hearing was presided over by NTC chairman Dr Faizullah Khilji and attended by representatives of various industries associated with the detergent powder trade.

Speaking on the occasion, the NTC chairman told the participants that the competition did not lie in large differentials between tariff rates, but in their reduction. It was the objective of the government to realize a healthier industry.

Any protection, he pointed, could be only for a limited period. Many industries in Pakistan had enjoyed protection for 50 years and yet, they wanted more of it. This was no longer feasible in the present era of global integration of markets and products, he added.

A representative of the applicant industry, Zulfiqar Ali Lakhani, managing director of Colgate-Palmolive (Pakistan) Ltd, said that his company had recently established a plant with the capacity to produce 20,000 tons of sulfonic acid per year with an investment of nearly Rs133 million.

Two of its main inputs were DDB (Dodecyl Benzene) and LAB (Alkyl Benzene) on which the government had imposed a customs duty of 10 per cent. But the same duty was also applicable to the sulfonic acid, which is manufactured from these and which in itself is an intermediate item used in the production of detergent powder.

Equal tariff on the two sets of materials posed a threat to the viability of their plant. Mr Lakhani, therefore, demanded that the duty on DDB and LAB be reduced to zero in order to help it compete with the sulfonic acid imports.

Responding to a question by Dr Khilji, he said the total demand of sulfonic acid in Pakistan was 22,000 tons. Colgate- Palmolive, the NTC was told, planned to use 50 per cent of their production of sulfonic acid in their own factory, while the rest would be sold in the local market.

Basharat Ahmed, corporate manager of Unilever, pointed out that the government had established the system of four slabs, according to which the industrial raw material was subject to 10pc customs duty.

The two substances were intermediate products that were basically derived from hydrocarbons. The question was: Would the acceptance of demand for zero duty on these not contradict the four-slab system? he remarked.

Asked as to how the proposed measure would affect his own firm, he said one of his concerns was the impact on the government's revenue because out of its total turnover of Rs25 billion per annum, Unilever paid Rs9 billion as tax revenue.

The total demand of detergent powder, he further stated, was 65,000 to 67,000 tons per annum. Of this, 40,000 tons were produced by Unilever.

The meeting was also informed that the demand for detergent powder was growing at the rate of 4-5 per cent per annum. And yet, its consumption was concentrated entirely in urban areas.

The meeting also noted that the country-wide consumption of laundry soap was 350,000 tons and this demand was being met mostly by the cottage industry.

The NTC chairman advised the parties having interest in the matter to provide the statistical data about the demand of various secondary inputs of detergent powder along with their cost of production so that the commission might formulate its recommendation accordingly.