India budget to have limited impact on petchems - sources

07 July 2009 12:20  [Source: ICIS news]

By Prema Viswanathan and Salmon Aidan Lee

SINGAPORE (ICIS news)--The additional excise duties imposed on some petrochemical products in India's 2009-2010 budget will not have a huge impact on producers' margins, market players said on Tuesday.

Importers of purified terephthalic acid (PTA) said the doubling of excise duty on fibre intermediates to 8% would likely add to their costs but they could transfer them to the next segment of the chain.

"We’re export-oriented, so most duties and taxes would eventually be returned to us in the form of rebates," said a source from South Asian Petrochemical (SAP), a producer of bottle-grade polyethylene terephthalate (PET) in Haldia, on the east coast of India.

"And even if there are no rebates, we’d transfer to the next segment of the chain and we need not bear [the costs]," added the SAP source.

However, for integrated producers, such as Reliance Industries, JBF Industries and Garden Silk Mill, the reinstated duties could mean additional costs.

These companies have been importing large amounts of intermediates for polyester production, as India has been net short of PTA since last year.

The firms have downstream spinning, weaving, dyeing and apparels manufacturing, and they also import fibre-grade PET.

"Our downstream plants are also our own, so whether it’s transferred to the polyester or to the spinning or weaving [segments], it’d still be additional costs for us," said a source from Reliance.

A JBF official said that the new additional duties had come at a time when Indian buyers were short of PTA.

"Mitsubishi Chemical is supposed to start up their new [PTA] plant soon, but still has yet to do so, so we’d still have to depend on imports," a JBF source said.

Polymer makers, however, were relieved that the 8% excise duty on polymers had not been revised upwards. Most of them said they had feared that the excise duty would be raised from the current 8%.

"We are relieved that there has been no change in the duty," a leading polymer producer said.

The producer said it was disappointed that the government had not provided any relief in terms of their feedstock costs.

"We were hoping that the 5% tariff on naphtha for polymer production would be waived, but our hopes were belied," the producer said.

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By: Prema Viswanathan
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