NEW DELHI: The Central Government's decision to cut customs duty on 11 product categories to check inflation is likely to result in a revenue loss of about Rs. 3,000 crore, even as industry cautioned against its adverse impact on the domestic manufacturing sector.

"We were planning to do this anyway on February 28... We decided to advance it because it has the potential to check inflation, especially in the manufacturing sector,'' Finance Minister P. Chidambaram told reporters here on Tuesday.

Official sources said the Finance Ministry had projected that while the decision to bring down the customs duty might dampen rising prices in certain manufacturing sectors, it would result in a revenue loss of Rs. 3,000 crore.

The Government on Monday abolished the import duty on portland cement, which stood at 12.5 per cent. It also reduced the import duties on primary and semi-finished metals such as aluminium and copper and certain specified capital goods.

Meanwhile, industry bodies have largely welcomed the Government's move, saying that it would give a fillip to large projects in manufacturing and check rising prices.

However, the Federation of Indian Chambers of Commerce and Industry (FICCI) cautioned that in the case of commodities that were produced domestically as final products, a sharp and sudden cut in the customs duty could adversely impact the competitiveness of domestic companies engaged in production of such items.

FICCI also said the inflation rate would be best addressed by market forces and supply in the economy would increase to meet the rising demand. This, in turn, would help bring down prices through a natural process.

Assocham said it welcomed the move as it had sought duty reduction in its pre-budget memorandum.

Justifying the customs duty cut on cement, raw materials and capital goods, the chamber said it was not just rising prices of essential commodities that were fuelling inflation but also prices of cement and aluminium.

The Confederation of Indian Industry President, R. Seshasayee, said in a statement that the inflation rate was largely fuelled by rise in prices of food items.

"Therefore, it is quite uncertain as to how much of an effect the customs duty cut for certain industry items would have in easing the plight of the common man,'' he said. He said in the medium and long term, the whole issue of supply side shortages would have to be addressed in a comprehensive manner, since reduction of duties could only serve as short-term responses to a price situation. — PTI

PTI reports from Mumbai

FMC suspends trading in urad, tur

The Forward Markets Commission (FMC) on Tuesday suspended trading in urad and tur on all bourses with a view to bringing down the prices of the two pulses, which have partly contributed to inflation inching up to a two-year high. The FMC has directed that all contracts of urad and tur now being traded on the National Commodity Exchanges be delisted with immediate effect. The move comes just hours after FMC Chairman S. Sundereshan met the Agriculture and Consumer Affairs Minister, Sharad Pawar.

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