Why in the News?

The Finance Ministry has reversed the proposed post-Budget customs duty hike on imported laboratory chemicals following an outcry from scientists.

What are the different kinds of chemicals which are imported into the country?

Inorganic Chemicals: This category includes substances like ammonia, phosphoric acid, and sulfuric acid, which are essential for various industrial applications.
Organic Chemicals: Key imports in this category are methanol, acetic acid, and phenol, which are used in the production of plastics, solvents, and pharmaceuticals.
Petrochemicals: Significant imports include polyethene, polypropylene, and styrene, which are crucial for manufacturing plastics and synthetic materials.
Speciality Chemicals: Chemicals such as ethyl vinyl acetate and maleic anhydride are imported for specific applications in industries like adhesives and coatings.
Agrochemicals: This includes various pesticides and herbicides, which are vital for agricultural productivity and crop protection.

Foundation for Experimental Work: Laboratory chemicals are essential for conducting experiments in various scientific fields, enabling researchers to test hypotheses and validate results.
Facilitate Innovation: These chemicals allow for the development of new products and technologies, driving advancements in industries such as pharmaceuticals, biotechnology, and materials science.
Support Medical Diagnostics: Laboratory chemicals play a crucial role in medical testing and diagnostics, aiding in disease detection and treatment monitoring, which is vital for public health.

Steep Duty Increase: The hike in customs duty on laboratory chemicals alarmed the scientific community, with prices of essential chemicals projected to rise dramatically, such as a batch that typically costs ₹1,00,000 now estimated at ₹2,50,000.
Impact on Research: Researchers expressed concerns that the increased costs would hinder scientific research and experimentation, as many essential chemicals are imported and the hike could disrupt ongoing projects.

Import Volume: India imported approximately 635 million liters of ethanol in 2022, primarily for use as fuel and in industrial applications.
Types of Ethanol: There are two main types of ethanol relevant to India:
- Denatured Ethanol: This type is mixed with additives to make it unfit for consumption and is primarily used in laboratories and industrial applications. India has reduced the import tariff on denatured ethanol to encourage its use in manufacturing.
- Undenatured Ethanol: This type incurs a higher import tariff of 150% and is generally used for beverage production.
Domestic Production Challenges: Although India has a significant capacity for ethanol production, it often faces challenges such as insufficient molasses supply. The government has set ambitious goals for ethanol blending in gasoline, aiming for a 20% blend by 2025.

The Finance Ministry clarified that all imported laboratory chemicals, except undenatured ethyl alcohol, will be taxed at the original 10% customs duty rate instead of the proposed 150% hike.
The customs department had initially hiked the duty to 150% to curb the import of undenatured ethyl alcohol that was being mis-declared as laboratory chemicals to avoid the higher 150% duty on undenatured ethanol.

Strengthen Local Production of Niche Chemicals: Need to invest in domestic manufacturing capabilities for niche and specialty chemicals to reduce dependency on imports, enhance self-sufficiency, and lower costs for research institutions.
Facilitate Smooth Import Processes: Govt. should streamline import regulations for essential laboratory chemicals, ensuring clear guidelines and minimal delays, while maintaining necessary checks to prevent misclassification and misuse.