Increase in Customs duty on polymers to help domestic producers

Indian government raised customs duty on polymers to 7.5% from 5% effective 9th May 2013 in response to the industry's long standing demands. This includes polyethylene (PE), polypropylene (PP), poly vinyl chloride (PVC), polystyrene (PS) and ethyl vinyl acetate (EVA). Since the raw materials needed to produce these polymers such as naphtha and ethylene still attract a 5% duty, the rise in customs duty on polymers would help improve the producers' margins.

"We note that India is currently a net importer of PE, PVC but a net exporter of PP, PS and we estimate that medium to long term demand growth will keep India in deficit for most chemicals. Strong domestic demand will also allow higher duties to be passed on to downstream converters, and eventually almost entirely to end users, in our view," mentioned a note from Goldman Sachs. "We note polymer demand has been increasing in India, by 10.3% over FY09-13," it went on to add.

Among the listed players Reliance Industries, Gail and Indian Oil are among the biggest polymer producing companies. Among mid-sized companies Finolex Industries, DCW and DCM Shriram Consolidated produce PVC, while Supreme Petrochemicals makes polystyrene.