The Hindu Business Line : Polymer, naphtha duty cut unlikely to hit Reliance

THE duty cut in polymers and naphtha is not likely to have any impact on the price line of Reliance Industries Ltd, the largest producer of polymers in the country.

The reason being cited for this insulation from the duty cut is that it had always managed to keep its product prices lower than the landed price of imported polymers.

While there was no official response from RIL, an industry source said that the duty cut was unlikely to trigger any immediate price cut by Reliance.

"Historically, Reliance has always kept its prices lower than the landed price of polymers. To that extent, the present duty cut is unlikely to impact the company's sales or lead to any lowering of its prices," he said.

It was only in the third week of September that RIL had slashed its polymer product prices by Rs 2 per kg. Then, the company had said that the move would help the Government in its efforts to battle inflation and contain consumer prices.

RIL had said that it was slashing polymer prices in spite of increasing costs of inputs such as crude oil and naphtha since April 2004. Hence, the present duty roll back may not result in a commensurate reduction in prices by RIL, it is understood.

Before the September price cut by RIL, polypropylene (PP) had touched Rs 63.70 per kg, up Rs 6 from August. The PP price had risen from Rs 49.75 in June, showing a Rs 13.75 spurt in only three months. Similarly, the RIL prices of polyethylene stood at Rs 63.20 per kg in early September, a rise of Rs 5 in a month and by as much as Rs 12.50 since June 2004. And in the case of polyvinyl chloride, the price had risen to Rs 54 per kg, up by Rs 11.50 since June this year, before RIL went in for the Rs 2 per kg reduction.

"Reliance is one of the largest naphtha importers for its polymer manufacturing units. It would be the biggest beneficiary of this move. The move does not affect public sector oil companies or our customers," said an IOC official.

A view that was reflected by BPCL: "Naphtha imports should become cheaper by roughly Rs 1,000 per tonne for importers."

Our Ahmedabad Bureau adds: An industry analyst said that the reduction was unlikely to affect GAIL and IPCL, both of which primarily use natural gas as feedstock. "The installed capacity using naphtha is rather limited with GAIL and IPCL, so the reduction will not have much of an impact on them. With product prices rising in the international market and the dollar rising against the rupee, even the impact due to the reduction in duties for polymers will have very little impact on these players," the analyst said.

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