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Industries Assistance Commission report on calcium carbide



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CP

77/7

*

Industries Assistance Commission Report on

Calcium Carbide

(Joint Statement by the Minister for Industry and Commerce, Senator Robert Cotton, and the acting:Minister for Business and Consumer Affairs, Mr I an. vMaoPhee). . .

The Minister for Industry and Commerce, Senator

Robert Cotton, and the Minister for Business and Consumer

Affairs, Mr John Howard, today announced that the Government

had decided to reduce the level of tariff assistance afforded

the manufacture of calcium carbide in Australia, and to .

revise the arrangements under which imported calcium carbide

is granted entry under Customs By-law.

The Ministers said that the rate of duty applicable

. to calcium carbide would be 25% General until 30 April 1978,

and 10% thereafter. Imports in 1977 and subsequent years

would be granted entry under Customs By-law on the

difference between Australian demand for, and production of,

calcium carbide at rates presently applying to By-law imports.

This decision followed consideration by the

Government of the Industries Assistance Commission report of

15 December 1976 on Calcium Carbide. The Commission had

recommended a rate of duty of 15% until April 1978 pending

the modernization of Tasmanian Carbide Products plant,

which is expected to operate with lower unit costs than the

existing plant. The Commission had also recommended a rate

of 10% thereafter and a revised By-law arrangement in 1977

and subsequent years providing for admission at minimum rates

of duty of the difference between Australian production and

. . . /2

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demand.

While it accepted the Commission's recommendation

for a long term rate of 10%, the Government believed that a

rate of 25% was more appropriate than 15% until April 1978.

The Ministers said that the higher short term rate would

reduce any adverse effects of the uncertainties noted by

the Commission to be associated with the proposed plant

modernization.

In view of the trade agreement with Canada

concerning By-law rates of duty, the Government had decided

that the existing preference rates under By-law for

Canadian imports would continue.

The Government has also decided that calcium

carbide would no longer be accorded Developing Countries

Tariff Preference. .

Copies of the Commission's report will be

available shortly from Australian Government Publishing

Service retail bookshops in each of the capital cities.

The Ministers have also released correspondence with the

Commission.

CANBERRA, A.C.T.

2 February 1977

DEPARTMENT OF BUSINESS AND CONSUMER AFFAIRS Canberra. a.c.t. 2600 TELE PHONE: . Reply ® TAe Secretary'

. . Quot» 76/7722

/7 January 1977

The Secretary, Industries Assistance Commission, Kings Avenue, BARTON . A.C.T. 2600:

Report No. 116 - Calcium Carbide

To assist €he Standing Committee on Industries Assistance in its consideration of the above report, the Commission’s further advice is requested on certain matters following recent movements in the exchange rate of the Australian dollar.

The Committee notes that the Commission in its report drew attention to the considerable degree of estimation and resultant uncertainty associated with the local industry’s proposals and to difficulties in predicting the effects of

the recent devaluation of the Australian dollar. The Committee appreciates that the answers to the questions posed below will be provided against the background of these comments.

Hie Committee has been advised that the costs of anthracite and steel drums have increased since the Commission’s report.

In the light of movements in exchange rates since the 17.5% devaluation of the Australian dollar on 28 November 1976, including movements since 15 December 1976 when the Commission’s report was signed and recent cost increases, advice

is sought on

. (a) whether the Commission believes its recommended levels of short and long-term assistance, are . atill appropriate, and

(b) what levels of assistance would be necessary at the current exchange rate, price and cost levels to be reasonably certain that the planned production will proceed. . _

(L. J. Willett) Assistant Secretary Protection Policy - A Branch

4.

Industries Assistance Commission

All correspondence to be addressed to: The Secretary, Industries Assistance

Commission, P.O. Box 80 Canberra, A.C.T. 2600 Telephone: 73 0415 In reply please quote:

Kings Avenue Canberra, A .C .T.

19 January 1977

The Secretary, Department of Business and Consumer Affairs, CANBERRA. A.C.T. 2600

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REPORT NO. life - CALCIUM CARBIDE

In your memorandum, ref. 76/7722, of 17 January 1977, you requested further advice on certain matters relating to the above- mentioned report.

The Commission's report emphasised the uncertainties inherent in the costings submitted by Tasmanian Carbide Products but, in recognition of the apparent low cost status of the proposed production, it made rather generous allowance in its recommendations for, inter alia, possible variations from the costs submitted.

Although it does not have details of the cost increases to which you refer, the Commission would be most surprised if they were greater than would be covered by the allowance just referred to. In any event, that allowance was in addition to a specific adjustment made to cover the

increase in anthracite costs expected to result from devaluation - an · · adjustment greater than would be warranted by current exchange rates - and, as stated by Tasmanian Carbide Products at the Hobart hearing (transcript page 36), any escalation in overseas prices of imported material would

presumably apply to purchases by overseas carbide producers also.

In the circumstances described, the Commission considers that its recommendations are still appropriate and that, on the estimates and facts available to it, the provision of higher assistance in an endeavour to ensure that the project proceeds could not be justified.

The Commission still believes, as stated on the first page of the report, that the recommended assistance will enable the firm to build and operate the new plant profitably and to increase production in the existing plant. However, the decision on whether or not to proceed with the new plant must be made by the firm and will depend, not only on the protection available,

but on its assessment of all the relevant factors, including its ability to raise the necessary finance.

(A.E.S. DAVEY) Secretary