India chem industry urges lower export/import tax

03 January 2008 12:41  [Source: ICIS news]

By Divya Chowdhury

MUMBAI (ICIS news)--India’s petrochemicals and chemicals industry is demanding the government reduce import duties on building block raw materials and furnace oil and cut excise duty on synthetic fibres in its upcoming budget to compete on a level playing field with other nations, senior officials from industry bodies said on Thursday.

"The industry needs a zero-duty structure in the building block raw materials and furnace oil to become globally competitive," said Aegis Logistics managing director SK Hazra, who also chairs Indian Chemical Council’s (ICC) environment and infrastructure committees.

Building block raw materials - xylene, styrene and methanol - attract import duties varying between 5.0%-7.5%, while that on furnace oil, which is the basic fuel, currently stands at 5.0%.

The government is mulling putting the building blocks in a zero-duty structure and import duty on furnace oil was likely to be reduced but not by as much, Hazra said.

India imports all its styrene requirements of around 400,000-500,000 tonnes/year, while domestic demand for methanol stands at 950,000 tonnes/year, of which India imports about 55%-60%.

India’s Association of Synthetic Fibre Industry (ASFI) is also demanding parity in the excise duty structures between synthetic fibres and cotton to improve growth in the sector.

"Currently the excise duty on synthetic fibres stands at 8%, while that on cotton is 0%. If this is retained, synthetic fibres will grow at 8% next year," said ASFI secretary-general SC Kapur.

"However, the growth can be at 15% if the excise duty on synthetic fibres is brought down to 4% in the coming budget," he added.

India has combined polyester filament yarn (PFY) and polyester staple fibre (PSF) capacity of 3.35m tonnes/year.

However, with fiscal 2007-2008 domestic consumption being estimated at around 2.24m tonnes/year and exports at 350,000 tonnes/year, there will be an estimated surplus capacity of 760,000 tonnes.

Multi-tier taxation at central and state level, import and other local duties needed to be removed as well since they inhibited inter-state trade and the industry’s growth, Hazra said.

The central government is expected to release its budget for the 2008-2009 fiscal year on 29 February.

By: Divya Chowdhury
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