Centre weighs duty cut on petrochemicals

NEW DELHI: In an effort to contain prices of a host of items ranging from detergents and packing materials to synthetic textiles and fashion accessories, the government may slash excise duty on major petrochemical feedstock and building blocks that go into their making.

The government is now examining the possibility of scrapping the 5% import duty on naphtha. This is a feedstock for producing petrochemical building blocks ethylene, propylene, and butadiene in addition to various plastics, industrial chemicals and synthetic fiber precursors. Slashing the duty on naphtha could have a cascading effect on all the downstream products. Polymer producers claim that the rising feedstock cost is delaying fresh projects.

The government is also examining he possibility of slashing the excise duty on all plastic products and polymers from 14% to 8%.

Polymers include linear low density polyethylene (LLDPE), low density polyethylene (LDPE), polypropylene and polystyrene that go into a large number of products from containers to electronic components and laboratory equipment.
The decision may cool prices of products that use nylon, polyvinyl chloride and polystyrene such as fabrics, tooth brushes and engineering material.

It may benefit a lot of small plastic processing units hit by the rising input cost as well as large polymer producers like Reliance Industries, India Glycols, BASF Styrenics, Gail and Haldia Petrochemicals.

The government, however, may not impose export duty on polymers as is being rumored since polymer availability is not a major concern now, unlike steel products. Export duty on steel was imposed recently to enhance domestic supply and tame inflation.

The government is of the view that such a need does not exist in polymers now, it is understood. The government may also not lower customs duty on polymers from the current 5%, it is understood. This might benefit domestic polymer makers.

The ministry of chemicals and fertilizers have asked industry bodies representing plastic manufacturing sector to give details of the demand, consumption, availability and revenue so that it could process the proposal with the finance ministry.

Due to the ever rising crude oil price, polymer producers have increased prices about five times since May this year, leading to price rise in the end products.