FocusIndia to rationalise inverted import duty structure on petchems

06 June 2012 07:06  [Source: ICIS news]

By Ajoy K Das

KOLKATA (ICIS)--India will initiate an exercise to correct its inverted import duty structure on chemicals and petrochemicals, wherein feedstock attracts a lower duty than several downstream value-added products, a senior government official said on Wednesday.

“This will be an elaborate exercise and may not be possible through a single amendment. Consultations would be required with all user industry representatives,” said the official from the Ministry of Chemicals and Fertiliser who declined to be named.

“Rationalization of the import duties – which would seek a low import duty regime on  feedstock, and progressively move up along the value chain – would be completed by 2017, as recommended by the Planning Commission,” he added.

The ministry official said that demand-supply dynamics of each downstream product and international trade trends would have to be examined in the process of rationalising the duty structure.

Sudden reduction in import duty may lead to dumping, and safeguard duties may have to be selectively considered to prevent harm to domestic producers, he said.

At the same time, some upward adjustment of duty on value-added products would offer domestic producers some protection from import dumping, the official said.

All these would require much product-wise balancing and consultation between ministries of chemicals and fertilizers, commerce and finance, the official said.

The Planning Commission, which proposed the rationalization of import duties, has suggested that no duty should apply to petrochemical feedstocks such as naphtha and liquefied natural gas (LNG).

A 2% duty should apply to imports of intermediates like ethylene, propylene and benzene, while primary petrochemicals like polymers and bulk chemicals should be changed an import duty of 5%, according to the proposal.

For specialty products, it was proposed that a 10% duty should apply, while the existing 10% duty on imported capital goods for the petrochemical industry should be scrapped.

currently levies an import duty of 5% on feedstock, intermediates and primary petrochemicals, while all other value-added products are charged with a 7.5% duty.

The proposed rationalisation of the import duty is being pursued upon the request of Basic Chemicals, Pharmaceuticals & Cosmetics Export Promotion Council (CHEMEXCIL).

“It is an anomalous situation today where India is a net exporter of naphtha,” said a senior official from CHEMEXCIL, citing that heavy imports of feedstock at higher duties by downstream product manufacturers make them uncompetitive in international markets.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Ajoy K Das
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