Our Bureau

New Delhi, Feb. 28

The Budget for 2006-07 presented in Parliament on Tuesday has some good news for the chemicals industry.

The Finance Minister, Mr P. Chidambaram, has proposed to reduce the customs duty on basic and organic chemicals from 15 per cent to 10 per cent. For basic cyclic and acyclic hydrocarbons and their derivatives to 5 per cent and for catalysts from 10 per cent to 7.5 per cent.

Stating that plastics are important raw materials for many industries, the Budget has proposed the reduction of duty on major bulk plastics such as PVC, LDPE and PP from 10 per cent to 5 per cent.

To boost domestic plastic production, the Finance Minister has proposed that for raw materials used in plastic manufacturing, such as styrene, EDC and VCM, the import duty should be reduced to 2 per while naphtha for plastics will have nil duty.

Mr Chidambaram also said, "Petroleum, chemicals and petro-chemicals (PC&P) is a sector with potential for large investment and employment."

Negative impact for RIL

Our Mumbai Bureau adds:

The downward revision of customs duty on polymers is set to negatively impact Reliance group both Reliance Industries Ltd and Indian Petrochemicals Corporation Ltd.

The view on the impact by Reliance group is understood to be `marginally negative' as things are expected to even out on account of increased push on the demand side.

The area for concern for RIL and IPCL is that the new import duty levels have tipped the tariff level below those prevailing in ASEAN countries. It remains to be seen how the Reliance group rides out the potential threat of cheap imports from ASEAN countries in the coming days. The company officials were not available for comment.

P.S. Jayaraman, Managing Director, Chemplast

Although the differential between customs duties on PVC and the raw material for manufacturing PVC has been narrowed down from 5 per cent to 3 per cent, Chemplast will not be affected much. This is because the Special Additional Duty of 4 per cent will make imported PVC costlier for trader-importers, who cannot get Modvat benefit.

- Our Chennai Bureau

(This article was published in the Business Line print edition dated March 1, 2006)
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