Centre waives duties on key petrochemical products amid supply disruptions due to Iran war

The central government on Thursday exempted a wide range of critical petrochemical products from import taxes till June 30th, in light of the ongoing war in the Middle East and the consequent disruptions in global supply chains.

The exemptions, effective from April 2, apply to imports ⁠of products such as ammonium nitrate, methanol, styrene, acetic acid and polyvinyl chloride, the government order said.

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The ‌government also exempted ammonium nitrate from ⁠the Agriculture Infrastructure and Development Cess for the same period.

Detailed list of the products exempted

• Anhydrous ammonia
• Toluene
• Styrene
• Dichloromethane (methylene chloride)
• Vinyl chloride monomer
• Methanol (methyl alcohol)
• Isopropyl alcohol
• Monoethylene Glycol (MEG)
• Phenol
• Acetic acid
• Vinyl acetate monomer
• Purified Terephthalic Acid (PTA)
• Ethylenediamine
• Di Ethanolamine and Mono Ethanolamine
• Toluene di-isocyanate
• Ammonium nitrate
• Linear alkylbenzenes
• Polymers of ethylene (including Ethylene-vinyl acetate)
• Polypropylene
• Polystyrene
• Styrene-acrylonitrile (SAN)
• Acrylonitrile-butadiene-styrene (ABS)
• Polyvinyl Chloride (PVC)
• Polytetrafluoroethylene
• Polyvinyl acetate
• Polyvinyl alcohol
• Poly (methyl methacrylate)
• Polyoxymethylene (POM - acetal)
• Polyols
• Polyether Ether Ketone (PEEK)
• Epoxy resins
• Polycarbonates
• Alkyd resins
• Polyethylene terephthalate (PET) chips
• Unsaturated polyester resins
• Polybutylene terephthalate
• Formaldehyde, Urea formaldehyde, Melamine formaldehyde, Phenol formaldehyde
• Polyurethanes
• Polyphenylene sulphide (PPS)
• Polybutadiene, Styrene butadiene

A clutch of industries that use petrochemicals as inputs, from pharmaceuticals and paints to textiles and toys, is facing the brunt of the Iran conflict as refiners have passed on the surge in crude oil and natural gas prices. Some of the downstream sectors in the petrochemicals complex are labour-intensive small enterprises with low pricing power, such as textile units where distress is showing up in employment figures.

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These industries were looking at an extended spell of margin pressure as input costs are unlikely to subside till global petrochemicals supply chain recovers, possibly only months after hostilities end in the Persian Gulf.

India's Goldilocks economic scenario of strong growth and low inflation is over. Effects of petrochem inflation are not as immediate as fuel - these appear with a lag. Packaging price rises show up in new inventory that arrives in the market with a delay. Petrochem use is almost universal in consumer goods, and the ticket shock, though slow and imperceptible, shows up over time. The price transmission works through labour-intensive industries and affects lower-income consumers.