The Hindu Business Line : Petrochemicals: Party in the pipeline

The effective protection, inclusive of countervailing duty and special additional duty, which was 50.8 per cent earlier, will now fall to just 39.2 per cent.

Significantly, the duty on ethylene, which is the mother chemical for polymer production, remains at 10 per cent (effective rate of 27.6 per cent).

In effect, while the duty on finished products has dropped to 39.2 per cent, that on the raw material remains at 27.6 per cent.

Though this appears to be an unkind cut for petrochemical companies such as Reliance Industries, Indian Petrochemicals Corporation, Gail India and Haldia Petrochemicals, the fact is that they may not be affected because they produce their own ethylene.

Had they needed to import the raw material, they would have been affected badly.

While the duty reduction on finished products may have a minor short-term impact on prices, it is difficult to visualise any long-term damage. This is because the petrochemicals market is witnessing a revival of demand and strong prices worldwide.

Though prices may fall temporarily, they are bound to move up again as the petrochemicals price cycle is on the upswing at the moment.

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