Custom duty waiver for CFLs in budget: Nothing to cheer about

Finance Minister Pranab Mukherjee might have given breather for makers of energy efficient devices like Compact Fluorescent Lamps (CFLs) and Light Emitting Diodes (LEDs), but it will hardly benefit the manufacturers and consumers.

In his budget speech, the minister proposed to fully exempt tri-band phosphor, a coating chemical used in CFLs, from basic customs duty. The manufactures usually pay 10 per cent customs duty on the imports of tri-band phosphor, a rare earth mineral. The prices of tri-band phosphor have skyrocketed from US $60 per kg in December 2010 to US $450 per kg in June 2011. It recently stabilised at about US $188 per kg. “The exemption of the custom duty will not reduce the prices significantly. Back- of- the- envelope calculations show that it would only be a reduction of 50 paise on manufacturing one CFL,” says Nikhil Gupta, product manager, CFL, Philips. Sunil Sikka, president of Havells, echoes Gupta’s sentiments. “Customs duty exemption sounds good but on the ground it is not much of a change.” Customs duty is a very small part of the overall duty we have to pay on importing tri-band phosphor, which comes to around 25 per cent. China has more than 90 per cent reserves of the rare earth mineral, he adds. 

Similarly, in case of LEDs, customers should not expect any big change in prices. The finance minister has proposed to reduce excise duty on LED lamps by 6 per cent. “LEDs cost between Rs 400 and Rs 500. Six per cent reduction in excise duty would roughly mean a cost reduction from Rs 10 to Rs 12,” says Gupta.   

 

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