Job-generating sectors may get Customs sops

NEW DELHI: Union Budget 2007-08 may give a booster dose to key employment-generating sectors. The finance ministry is actively considering lowering import duties on equipment and machinery for leather, footwear, textiles & clothing and sports goods industries to aid expansion and upgradation.

A proposal in this regard was put forward by the commerce & industry ministry in its wishlist for the forthcoming budget. The finance ministry has accepted the proposal in-principle and is working out the nitty-gritty. The total duty on most of the equipment and machinery works out to 18% including the customs duty and countervailing duty. The finance ministry will carry out a detailed analysis of how the lowering of duty could help in upgradation in skills and work out a scheme for exporters.

In some of these sectors, some of the inputs needed for export products were on the higher rate of customs duty of 30%. Officials explained that duties on equipment such as leather processing machinery may be reduced. Similarly, sports goods and toys also have a higher rate on some of the inputs, which are expected to be brought down.

After his pre-budget consultations with exporters, finance minister P Chidambaram had said that some sops would be given to high employment generating sectors, but did not spell out which they would be.Speaking to ET, commerce ministry sources said that it had more or less been decided that the sops would be in the form of lower import duties on equipment & machinery for the identified sectors. “If machinery for the sectors become cheaper, it would encourage expansion and lead to more employment generation,” an official said.

Sectors like textiles, leather, toys and sports goods have been facing severe competition from China and some of the South East Asian countries, where import duties are very low. These countries also have the advantage of flexi-labour regime and quality infrastructure. Some measures like reduction in import duty here could give a leg-up to these sectors through upgradation.