The Hindu Business Line : Paswan to take up naphtha import duty issue with PM

Mumbai, March 4 With the five per cent duty proposed by the Union Budget on import of naphtha threatening the margins of petrochemical producers such as Reliance Industries Ltd, Haldia Petro, GAIL and Supreme, the Ministry of Chemicals and Fertilisers plans to take up the issue seriously with the Finance Minister.

The Union Minister of Chemicals and Fertilisers, Mr Ram Vilas Paswan, said he would be personally meeting the Finance Minister and the Prime Minister to discuss the issue of duty on naphtha imports. “We had earlier written to the Finance Ministry that there should be no duty on naphtha imports, but a 5 per cent duty was proposed in the Budget. I am concerned (over this),” he told reporters on the sidelines of the International Petrochem conference that began here on Tuesday.

Naphtha is the chief feedstock for the petrochemical industry, apart from natural gas.

While some producers like Haldia Petro use only naphtha as its feedstock, others like RIL use a mix of naphtha and natural gas. Feedstock accounts for about 50 to 60 per cent of the cost of production of petrochemical products.

Industry estimates have it that at present about four to five million tonnes (mt) of naphtha is imported by the petrochemical industry.

The additional burden that the 5 per cent duty would impose is estimated at $150 million, which is seen as a serious threat to the bottomlines of petrochemical producers.

Rising naphtha prices

Mr S.K. Bhowmik, Chairman of CII’s National Committee on Petrochemicals and Managing Director of Haldia Petro, said there had been a nearly 37 per cent increase in naphtha prices during the last seven to eight months.

Even for those producers that use gas as feedstock, there are problems of inadequate supplies, he pointed out.

Earlier, addressing the conference, Mr Paswan said the demand for polymers would increase from the current 5 mt to 10.5 mt by 2012.

“This means, there is potential for five cracker complexes of one mt ethylene capacity with a total investment of Rs 70,000 crore. We should grab this opportunity for investment in this vibrant sector,” he pointed out.

The Minister said the implementation of the National Policy on Petrochemicals was expected to attract new investments and enhance export potential.

“The Department of Chemicals and Petrochemicals has taken various steps for the implementation of the policy. An inter-Ministerial Group on development of plastic in thrust areas has been constituted — to start with plastics in agriculture, construction, pipes for potable water and packaging have been identified,” he said.

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