Govt may hike duty on electronic goods to ease CAD woes.

The government is keen to narrow the CAD via import compression and is preparing a report to identify areas where duties can be hiked. Though hiking duties on categories such as medicines, organic chemicals, cotton yarn and intermediate goods is not possible, the finance ministry is identifying areas of final consumption. CNBC-TV18's Aakanssha Sethi reports.

A large chunk of the imports — about 31.2 billion for 2012-2013 — is electronic goods. Here, the finance ministry is targeting about 13-14 billion where import duties can be hiked and demand can be restricted.

Now, there are certain products that are under the I-T agreement of 1991 and these cannot be touched. So only those products, which were not in existence in 1991, will see a hike in import duties.

FinMin draws up plan to shore up forex to insulate economy Apart from this, the other challenge is Free Trade Agreements (FTAs) with the various countries. Sources say that most of these FTAs have clauses to say that a certain amount of value addition has to take place in the country and countries, which are just being used as a route for cheap imports. There you are likely to see a hike in import duties.

The other big item is machinery, also at about 32 billion, but on that nothing much will be done because power equipment will see a hike in import duties about one and half years from now.

Auto is another big component at about 14 billion. But sources say since the auto sector is already seeing a slowdown, they would not like to target it.

Palm oil is other product, which is being talked about. Sources in the finance ministry say that 40 percent of the vegetable oil consumption in India is palm oil, again something they would not like to target.

That leaves you with iron and steel, again at 15 billion, where the finance ministry could consider a hike in import duties.

Source : moneycontrol.com