Imperative need for increasing custom duty on import of agrochemicals to safeguard Indian manufacturers: CCFI

Date:12-22-2022

Crop Care Federation of India (CCFI) is the oldest and the largest body of Indian Manufactures and exporters with their operations on PAN India basis.

Among issues raised to express some of the industry concerns, seeking intervention and for incorporation in the budget 2023-24 is urgent need to increase custom duty on import of Technical & Formulations.

In a communication sent on 25th Dec2022 to Mr Sanjay Malhotra IAS, Secretary Department of Revenue, Ministry of Finance the association has reiterated this concern on surge in imports .

Mr. Harish Mehta, senior advisor CCFI stated in media interaction that the very concept of building a competitive economic system for domestic industry has been hampered by surge in non essential imports of ready made formulations mainly by MNCs and traders who clandestinely import not for their captive consumption but primarily for merchant sale , with is not officially permissible.

″There has been a 37% surge in agrochemical imports during the last 2 years reaching the figure of Rs.12418 Cr. (2020-21) from Rs. 9096 Cr. in the previous year. Lately during (2021-22) the imports are to the tune of Rs. 13365 Cr.[ source ministry of Commerce]

Interestingly on analysis, we find that out of total imports, 55% was the estimated share of ready-made formulations imported (in value) which would go further unless stringent measures are not taken expeditiously.″
 

Among other reasons cited are:

INDIAN MANUFACTURERS PRODUCE AT A MUCH LOWER COST
 

1.  Whenever Indian manufacturers have produced molecules that previously were exclusively imported by MNCs, the reduction in price has been between 50-80%. For example, Sulfo Sulfuron, Bispyribac sodium, Imidacloprid, Thiomethaxam, Clodinofop, etc.
 

2.  Presently the Custom duty on Technical and Formulations is 10% which is a disincentive for any indigenous manufacturer who has huge investments and deployment of labour.
 

3.  On one side formulations are imported in sizeable quantities/value at the cost of foreign exchange outgo and on the other hand, importers make huge profits (up to 200%) from these imported formulations.
 

4.  In fact there is a need of scrutinize the price of the imported formulations.
 

INDIAN EXPORT ACCEPTED GLOBALLY
 

1.  As has been observed, the quality manufactured by indigenous manufactures matches global standards and is being exported to 130 countries.
 
2.  It would be worthwhile to mention that the Indian agrochemical industry has the technical capability and unutilised capacity of ~ 35% in liquids, granules and wettable powders to meet both domestic demand and exports. These exports are made majorly (85%) by only Indian agrochemical manufacturers, who are CCFI members, with exports reaching Rs. 36000 Cr in a total market of Rs. 65000 Cr.
 
3.  Once on attaining certain volumes, there would be no cost impact on the farmer.
 
CCFI CONTENTIONS FOR BUDGET 2023-24
 
I.  INCREASE IN CUSTOM DUTY
 
The industry is of the view that non-essential Imports should be stopped and simultaneously the customs duty on Imports of Technical Grade should be enhanced from present 10% to 20%. Likewise, custom duty on ready-made formulations be enhanced from the present 10% to 30% to safeguard the Indian Industry. The govt is also of the firm view that there has be a delta in custom duty structure

 
Formulation import entails no value addition, or investment or employment, a trend adopted by MNCs and commodity traders who do not have their own manufacturing plants in India.
 
II.  MANDATORY REGISTRATION OF TECHNICAL PRIOR TO IMPORT OF READY- MADE FORMULATION
 
This has been one of the major pain points of the indigenous agrochemical industry as MNCs and traders, clandestinely import ready- made formulation to the detriment to local manufactures. This needs to be stopped, as we have the Technical capability and capacity to meet the requirement.
 
III.  REDUCTION IN GST RATES ON AGROCHEMICAL WOULD BENEFIT ONLY IMPORTERS BESIDES LOSS OF REVENUE TO GOVT
 
The current rate of GST at 18% majorly covers all the goods and services procured by the industry and thereafter the product sold by the industry across the value chain are at 18% with the aim to provide a balancing and seamless flow of credit and its utilization. It also avoids the distortion caused due to inverted duty structure.

This rate covers more than 90% of the goods and services which are subject to GST. Similarly about 90% of the final products and services sold by the industry across the value chain are at this rate of 18%.

″Any reduction or exemption would result in loss of revenue estimated at Rs. 4,500 cr annually to the government, besides blocking of working capital which would increase cost of business.″ emphasised Mr Mehta.
 
IV.  INCLUSION OF AGROCHEMICALS AS A CHAMPION SECTOR UNDER PLI SCHEME

We have already submitted our proposal to Secretary Chemicals, Department of Chemicals & Petrochemicals for inclusion under PLI Scheme, so that India could emerge as a manufacturing hub and gain leadership once critical manufacturing capacities are enhanced.

We expect an investment of Rs. 12000 Cr. in the next 3 years, after its implementation as investments are getting delayed due to non inclusion.

 
″ A corpus of Rs. 500 Cr. should be provided by the government with the aim to follow the policy of ″Make in India″ towards Atmanirbhar Bharat fir which Indian manufacturers are committed″ stated Mr Mehta.