9/6/04 INDIA (Oilmandi) - Imported cooking oil and steel will now becomemore expensive as customs authorities stop allowing DEPB drawbacks in lieuof cash payment of import duty. Both these high-ticket commodities willnow have to shell out the education cess and all applicable surchargeswhich are exempt while claiming DEPB.

For cooking oils, that would mean an increase of at least Rs 500 a tonnein costs for importers, which would immediately be passed on to consumers.Till now, importers were claiming DEPB (duty entitlement passbook)drawbacks against virtually their entire customs duty liability. DEPBallows import of all items without payment of custom duties, providedimport of such items are not restricted as per ITCHS code.

Though no official reason has yet been given for the decision, CBEC isexpected to bolster its revenue collection by demanding cash instead ofallowing duty drawback.

According to industry sources, the CBEC’s decision could add to theinflationary spiral in prices unless balanced by a re-calculation of thedollar base prices on which duty is charged.

Unless the CBEC simultaneously also reduces the base dollar price ofimported cooking oil in line with world markets, there is certain to be afurther increase in consumer prices. The increase is too large for themarket to absorb itself, they said.

Interestingly, though it would mean an increase in costs, importers saythe decision is beneficial because it would end the problem of fraudulentDEPBs being faced by them.

We spend so much time in trying to accumulate DEPB licences for just a1.5% advantage. Now we can concentrate on our business. Moreover, evenafter our best efforts, brokers cheat us by delivering fraudulent DEPBsworth several crore. So we face a double whammy. We pay the duty in cashand also face a loss due to fraudulent DEPBs,said a large refiner in theSouth.

However, the industry is now hoping that the decision on DEPBs is applieduniformly by all ports across the country. There is no way Madras refinerscan compete if importers in Nagapattanam or Kakinada are allowing DEPBdrawbacks, sources said.

Meanwhile, with edible oils out of the reckoning, there is expected to bea drop in the price of DEPB licences in the market.

The basic purpose of DEPB scheme is to neutralise the incidence of varioustypes of duties charged in the input material. The neutralisation isprovided by grant of duty credit calculated on the basis of standardinput-output Norms. The calculation also takes into account the valueaddition achieved in export product.

The neutralisation of incidence of duty is based on consideration ofinputs on deemed imports and the rates of various duties of importchargeable on such inputs namely Basic Custom Duty, Surcharge on BasicCustoms Duty, Additional Duty and Special Additional Duty. However ratesare specified by the Director General of Foreign Trade.