India had already met and exceeded its commitment of binding rate made to WTO (at 35% as against 40%) and that too, a few years ahead of the deadline and there is no external reason to reduce tariff.

If Government keeps on reducing peak tariffs (to 20% by 2004-2005) it would weaken India's negotiating position in 2003 and 2004 when next WTO round of tariff discussions take place.

While reviewing tariffs, Government should view the tariff differential and not just peak tariffs. The Government is averse to reducing tariffs at the lower end and even basic inputs such as fuels and feedstocks continue to be at 15-20% as against zero in most ASEAN and developed countries.

The lowering of tariffs is not in the interest of economy and second generation reforms are not on track. The Government has failed on this count and is also unwilling to make any commitment on the time frame.

The primary reforms of the 1990s affected industry directly. These included delicensing, reduction in tariffs and freedom to import chemicals without any physical controls. At that time it was assumed that the primary reforms would be followed quickly by the secondary ones, which would bring international competitiveness to industry. These include :

Raw material cost to the industry has also been increasing due to the factors beyond its control. This is attributed mainly to poor infrastructure of ports, roads, railways and multiple tax regime, higher power cost and finance cost when compared globally as shown in the table:

VAT regime (both for Central and State taxes) should be implemented with effect from 1st April 2003 and there should not be any postponement in the date of implementation.

Duty on Naphtha which is basic feedstock has gone up over the last three years :

The existing duty structure on chemicals be maintained and in fact import duties should be at parity with WTO levels and import duty for feedstocks (Chapter 27 - Customs Tariff) and petrochemical building blocks (2901/2902 - Customs Tariff heading) should be lowered to nil and 5%, respectively.

The Government has announced Exemption to excisable goods cleared from units located in Kutch District and five year excise holiday is granted vide Notification No. 39/2001-Central Excise dated 31-7-2001 for rejuvenating the earthquake economy of Kutch region.

The Excise duty exemption should not be restricted to the original value of investment in plant and machinery but should be extended to subsequent investments in plant and machinery as well, within the qualifying period for capacity expansion, new products etc. All such subsequent investments be regarded for excise exemption eligibility for residual period.

In the aggregate value of clearances eligible for excise relief, which are restricted to twice the value of investment in plant and machinery, the value of exports and deemed exports which are otherwise not liable to excise duty should not be taken in to consideration.

Government should create chemical industry modernisation fund along the lines of the funds designed for textile, steel and shipping with initial corpus of Rs. 25,000 crores to be administered by the designated all-India financial institutions.

Soft loans should be made available @ LIBOR + 2% interest.

The commercial banks should consider specifically structured financial assistance on a sectoral basis for companies who undertake strategic alliance exercise and should also provide facilities for replacing older high interest debts with the new regime rates.

Part of the excise duties payable to the Government should be allowed to be converted in to medium term loan which can be utilised for modernisation and expansion and which will be repaid after a moratorium of 3 years in 5 annual instalments.

Import duties on all fuels used for power, energy and co-generation in the industry should be nil. This should include:

Import duty on Co-generation Plants / Captive Power Plants should be reduced to 5%.

DEPB scheme should be continued for at least two more years and should be allowed to stabilise at current levels and should not be debited for anti dumping / safeguard duties.

Deemed exports should be treated on par with physical exports to facilitate exporters to source their inputs domestically at international prices.

Capital goods and spare part imports should be allowed at reduced duty of 5% and second-hand equipments should also be allowed at reduced rate of duty.

Research and development funds similar to the one created for drugs and pharma, to upgrade and develop technologies as also to commercialise them, be created. R&D expenditure should be tax deductible to the extent of 125%.

Import of technology / designs and drawings should be made tax-free.

Import duty on Coke should be brought down to zero and import duty on steam Coal should be brought down from 25% to 5%.

Accelerated depreciation for modernisation expenses should be allowed.

The Industrial Alcohol is a basic raw material for number of products. However, it attracts duty level of 15%. The duty on Industrial Alcohol should be reduced to 5%.

Import duty on catalysts, which are not manufactured in India, should be made nil.

Spent precious metal catalysts be allowed for export allowing simple procedure. For this purpose reputed laboratories can be designated for ascertaining the precious metal content and on re-import of fresh catalysts manufactured out of recovery / regeneration of spent catalysts duly certified by the manufacturer and independent overseas laboratories, customs duties be limited to reactivation / re-manufacturing charges and not on metal.

The tax regime on mergers and acquisitions should be cost neutral.

No end use specific concessions should be granted.