ISLAMABAD: The government is considering a proposal of commerce ministry to rationalise customs duty on all products to a uniform rate of 25 per cent amid strong opposition from the ministry of industry and Federal Board of Revenue (FBR).
Despite this opposition, an official source told that a summary has been sent to the Economic Coordination Committee of the Federal Cabinet for consideration in its meeting to be convened on Tuesday.However, the FBR is opposing the move on the plea that it could lead to revenue loss.
Contrary to the FBR, the ministry of industries and production was opposing any reduction in the customs duty saying that it could minimise protection to domestic industries. Many developed countries evolved their industrial sector behind high tariff walls and then launched liberalisation of import regimes in the second phase.
The commerce ministry summary was based on a study commissioned by Planning Commission to further liberalise the import regime and reduce maximum duty to 25 per cent in the first phase.
As per proposal, a phased reduction in customs duty from 25 per cent has also been proposed to bring it at 10 per cent uniform rate in the next few years, which would be at par with the Indian maximum import duty in the region. There are several tariff slabs including zero, five, 10, 15, 20, 25, 35, 50 per cent etc., on import of goods.
Deputy Chairman Planning Commission Dr Nadeem Ul Haq, a former employee of the IMF, was strongly pushing the policymakers to reduce the customs duty on various products. However, economists who are against the idea of exposing nascent industry to stiff competition by lowering duty were proposing high tariff walls for developing industries in the country.
But the source in the commerce ministry claimed that the uniformity in customs tariff means that duty on individual products should be the same for all kind of importers, including traders irrespective of giving preferences to manufacturers over commercial importers.
It has also been proposed to cut down customs duty to a maximum uniform rate of 25 per cent on import of all types of motorcars along with components and 20 per cent on motorcycles in the first phase.
But the ministry of industry and National Tariff Commission, a subsidiary organisation of commerce ministry has already raised objections over the recommendations seeking reduction in the regulatory powers enjoyed by them in providing protection to the local manufacturers.
The ministry of commerce has also asked for working out of effective protection rate of duty for each industry for ensuring maximum protection to local industries.
At the same time, it was also proposed to bring down the customs duty to a maximum 10 per cent in a phased manner on import of motorcycles and its components to bring down its prices within the reach of the common people. However, it suggested announcing a further tariff cut and other basic changes to the auto sector policies.
It was also recommended to bring down immediately customs duty to 10 per cent on import of textile and clothing from existing 25 per cent, a decision which would attract maximum resistance from the local manufacturers who enjoy tariff and non-tariff protections.
It was proposed to do away with the licensing regime to avoid control of imports and exports of goods. The specific duty on certain goods like edible oil should also be converted into ad valorem in the upcoming budget.
