Lower import duty on finished products rather than on the raw material is impacting key manufacturing sectors, a survey by an apex business body revealed on Tuesday.

"Inverted customs duty structure on finished goods is eroding competitiveness of the manufacturing sector and discouraging domestic value addition, as the same tariff on the raw material or intermediate product is lower," the Federation of Indian Chambers of Commerce and Industry (Ficci) said in a statement here.

The six manufacturing sectors which pay higher import duty on finished products are capital goods (boilers, pressure vessels), cement, electronics and electricals, rubber products (including tyres), minerals and textiles.

The industry apex body has submitted the survey report to the Tariff Commission and Department of Industrial Policy and Promotion (DIPP) for early action while its delegation recently held meetings with the commission and submitted data for valuation studies in the sectors.

"The inversion is not because of basic custom duty but in some cases as a result of additional duties. In many cases, differential in the CVDs (countervailing duty) of final products and raw material showed a similar problem in excise regime too," the statement said.

With India having a slew of regional or bilateral free trade agreements and negotiating more, the duty inversion is affecting the key sectors.

"Though regional and bilateral pacts provide equal opportunity to Indian players in terms of exports, higher import duty on raw materials results in an inverted duty structure, making domestically manufactured goods uncompetitive," noted the statement.

Inverted duty structure in capital goods under chapter 84 for products like blow moulding machines, pressure vessels, parts of heat exchangers, parts of nuclear reactors, boilers affects their manufacturing.

Similarly, while import of cement does not attract basic customs duty, major inputs for manufacturing it — like limestone, gypsum, pet coke and pickling bags — attract customs duty.

"Over a million tonne of cement is being imported from Pakistan against domestic cement production of 280 million tonne. The imported cement, however, caters to only three-four districts in Punjab, which is discouraging to local manufactures," the statement noted.

Likewise, inversion in car batteries, copper rods and power cables prevail though levied duties are at par with raw materials. The trade pacts, however, create inversion, which will be steeper from next fiscal (2017-18).

Basic customs duty on finished rubber products has been exempted whereas 0-25 per cent duty is levied on inputs required for their manufacture, creating inversion in duty structure.