The Hindu : Assocham wants excise exemption restored for vanaspati

Online edition of India's National Newspaper
Saturday, Apr 19, 2003

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Assocham wants excise exemption restored for vanaspati

By Our Special Correspondent

NEW DELHI APRIL 18. The Associated Chambers of Commerce and Industry of India (Assocham) has suggested the Government to restore the exemption available to vanaspati by withdrawing the excise duty of 8 per cent levied in the Finance Bill.

In case withdrawal is not acceptable, the chamber has suggested that the duty on these products is fixed at specific rates of Rs. 500 a tonne (since no money credit for use of unconventional oils is at present available).

Excise duty on vanaspati and edible oils have traditionally been fixed at specific rates of duty and not ad valorem, since it is not practical to work out prices and pay duty on ad valorem excise duty as the prices were fluctuating minute to minute. Levy of excise duty at 8 per cent ad valorem translates to about Rs. 3,500 a tonne, which is steep. Excise duty on vanaspati and edible oils was Rs. 1,500 a tonne before its abolition in 1996.

After considering the money credit rebate of Rs. 1,000 a tonne, the net duty paid was Rs. 500 a tonne. The present hike to 8 per cent works out to Rs. 3,500 a tonne, which is steep and excessive.

The chamber says vanaspati, which is an item of mass consumption and extensively used by the vast rural poor has been imposed excise duty at 8 per cent working out to about Rs. 4 a kg.

Already the vanaspati industry is in the doldrums, hit badly by duty free imports of cheap Nepalese vanaspati and large-scale manufacture of refined palm oil, a cheaper substitute for vanaspati. With a price difference of Rs. 10 a kg, the industry is unable to face the onslaught of cheap Nepalese vanaspati.

Justifying its suggestion, the chamber pointed out that the discriminatory levy of excise duty based on brand name would distort prices of vanaspati besides creating a dual system of manufacture and marketing in branded and non-branded vanaspati besides encouraging various modalities to evade excise including conspicuous omission of brand names.

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