Alarmed by inflation touching a two-year high of 6.12 per cent, the government today reduced customs duty on a host of items such as cement, raw materials and capital goods to lower the cost of manufacturing and infrastructure development.

Customs duty has been lowered on specified capital goods and their parts, and winding wires from 12.5 per cent or 10 per cent to 7.5 per cent. Duty on portland cements has been totally removed from 12.5 per cent at present.

The customs tariff on project imports has been reduced from 12.5 per cent or 10 per cent now to 7.5 per cent. Further, airport development projects and 'Metro Rail projects would now be included in project imports and taxed at the rate of 7.5 per cent.

Moreover, import tariff on primary and semi-finished forms of copper, aluminium, zinc, tin, other base metals has been brought down from 7.5 per cent to 5 per cent. The duty on stainless steel and other alloy steel has been cut to 5 per cent from 7.5 per cent at present. Pipes and tubes of aluminium, copper and zinc would now attract a customs duty of 7.5 per cent from 12.5 per cent now.

"These changes will come into affect immediately," an official statement said.

The measures are aimed at curbing inflation, which rose to 6.12 per cent for the week ended January 6 on rise in prices of manufactured products, besides some food items and fuel.

The decision to customs duty assumes importance as Finance Minister P Chidambaram had recently said that certain manufacturing sectors were contributing to "core inflation" by jacking up the prices to benefit from the surging demand. He had said the government will take all necessary steps to check rising prices as inflation crossed the RBI's threshold limit of 5.5 per cent for this fiscal.

The decision also gains significance as the move comes just a month before the Budget for 2007-08, which is expected to further reduce import duties as Prime Minister Manmohan Singh has committed to bring down tariffs at the ASEAN level.

According to the notifications issued, the government has also brought down import duties on inorganic chemicals, like halogens (fluorine, chlorine, bromine, iodine), sulphur, carbon, hydrogen, rare gases (nitrogen, oxygen, silicon, phosphorus) and alkali metals (sodium, calcium) from 10 per cent to 5 per cent.

Customs duty on Carbon Black Feedstock has been reduced from 10 per cent to 5 per cent, and on calcined alumina from 7.5 per cent to 5 per cent. Duty on refractories would now be 5 per cent as against 7.5 per cent and specified raw materials of refractories five per cent compared to 10 per cent or 7.5 per cent.