CII has welcomed the intention of the government to remove zero customs duty regime but said that the proposal to allow supplies to ONGC and OIL at zero duty will put the domestic industry supplying to these sectors at a tremendous cost disadvantage.

CII has stressed that even if the raw materials/components to the domestic suppliers were allowed at `nil' customs duty, the disadvantage will be to the tune of 34 % at 48 % and the domestic industry will lose all orders to the overseas companies. The chamber has drawn attention to the fact that, to offset the incidence of local taxes and duties and additional financial burden faced by the Indian industry, government had imposed customs duty of 43 % for import of goods by ONGC and OIL.

CII said that while on onehand, the government had reduced the customs duty from 43 to nil, reduced the price preference from 15 % to nil and reduced the benefits under deemed exports to a negligible level, on the other hand, excise duty has been hiked from 10% to 13 % in 1998-99 and now in the current budget to 16 %. This, said the chamber, is unfortunate since the Indian industry had over the past four decades built sophisticated manufacturing facilities and also acquired state-of-the-art technology and expertise for execution of turnkey-contracts and supply of complete range of materials/ equipment required by the oil and gas sector.