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Considering that imports have become cheaper due to rise in rupee value, the Budget 2008-09 has proposed to keep peak customs duty rate unchanged at 10 per cent.
"Since April 2007, the rupee has appreciated against the dollar by 9.8 per cent. Consequently, the case for reducing the peak rate at this stage is very weak," Finance Minister P Chidambaram said, while proposing no change in the peak rate of customs duty on non-agriculture products in the General Budget for 2008-09, presented in Parliament.
The peak rate for non-agricultural products was 20 per cent in January 2004. Analysts said had there been not such a huge rupee appreciation, a cut in customs duty to the ASEAN level would have been possible.
However, the finance minister did announce a cut in customs duty in certain sectors to "provide a fillip to that industry or to promote value addition or to remove inversion or any other anomaly."
In this respect, Chidambaram proposed a cut in customs duty on Project Imports from 7.5 per cent to 5 per cent. However, he also proposed 4 per cent special countervailing duty on a few projects in the power sector.
The finance minister also withdrew duty on steel melting scrap and aluminium scrap from the current 5 per cent to "improve the supply of raw material".
Life saving drugs and bulk drugs used for manufacture of such drugs will attract lower customs duty of five per cent against 10 per cent at present. The finance minister also cut customs duty on specified parts of set-top-boxes, convergence products, specified machinery and raw materials for sports goods and certain raw materials for gems and jewellery and certain cattle feeds.