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Cracked down the middle

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CUSTOMS duties have been reduced across-the-board for petrochemicals and intermediates. While the duty on finished polymers is down to 10 per cent from 15 per cent, those on basic chemicals and intermediates is down from 10 to 5 per cent.

There will be an overall fall in prices of polymers and chemicals as the reduced duties kick in and landed prices of these commodities correspondingly go down.

The impact of these reductions will vary across the industry.

The ones to be affected are those using gas as feedstock as their input costs are not likely to go down.

This would mean that Indian Petrochemicals Corporation (IPCL) and Gail would see a minor constriction in their operating margins, as duties on finished products go down while that on inputs remain the same.

Both these companies use natural gas as feedstock for their crackers.

On the other hand, Reliance Industries and Haldia Petrochemicals which use naphtha as feedstock for their crackers will not be impacted because duty on naphtha has also been reduced from 20 to 10 per cent. Their operating margins will be protected.

Raghuvir Srinivasan

(This article was published in the Business Line print edition dated March 1, 2005)
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