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Rediff.com  » Business » ICC seeks removal of customs duty on input materials

ICC seeks removal of customs duty on input materials

February 29, 2012 16:56 IST

The Indian chemical industry has an output of around USD 80 billion and ranks 12th in the world while the size of the global chemical industry is in the region of USD 3 trillion.

Basic Chemicals and Chemical Products (except products of Petroleum and coal) is the single largest group with 14.002 per cent weight in the overall Index of Industrial production.

In the process, the sector contributes significantly towards industrial and economic growth of the nation, contributing approximately 3 per cent to the GDP.

The industry primarily consists of basic chemicals and its products, petrochemicals, agrochemicals, specialty chemicals, pharmaceuticals and biotech, paints and varnishes, dyestuff and inks, alco-chemicals, etc.

The Indian Chemical Council (ICC) represents one of the major sectors of Indian economy i.e. Chemical Industry.

The Council has over 370 members representing all segments of Chemical Industry such as Inorganic and Organic Chemicals, Petroleum Refining and The Indian chemical industry has an output of around USD 80 billion and ranks 12th in the world while the size of the global chemical industry is in the region of USD 3 trillion.

Petrochemicals, Fertilizers, Agrochemicals Pesticides, Dyes, Pharmaceuticals, Paints, Specialty Chemicals etc.

The main stumbling blocks, which the industry faces, are surge of imports from Asian and Middle East countries, producers from Middle East (with feedstock cost advantage) and China aggressively pursuing Indian markets due to very low tariff levels, growing menace of dumping, high cost of Power, Energy, Finance and Capital Equipment, internal transaction costs being one of the highest in India.

Having this in mind ICC in the Pre budget memorandum for Union Budget 2012-13 has proposed the following suggestions:

•           The first proposal they have put forth to the government is to eliminate customs duty on Alcohol for production of chemicals. Alcohol is a basic raw material for host of value added chemicals and it is derived from renewable sources so to promote the green chemistry it is desirable to eliminate customs duty

•           ICC has recommended elimination of customs duty on Liquefied Natural Gas (LNG). LNG is a major input both as energy source as well as feedstock for fertilizers and for petrochemicals. Currently it attracts 5 per cent duty and this high cost of energy has become a disadvantage for local producers

•           They have recommended that duty on basic feedstock on petrochemicals like Ethane, Propane and Butane needs to be brought down to zero from the current 5 per cent

•           Naphtha is a basic feedstock for the petrochemicals sectors and it is used to produce petrochemical building blocks like Ethylene, Propylene and eventually to Polymers like Polyethylene and Polypropylene. At present, duty on Naphtha is at 5 per cent. Duty on naphtha for production of fertilizer is already at zero level and they want the same to be made uniform for all users of naphtha for petrochemical production

•           ICC also have suggested to eliminate customs duty on majority of input and feedstock materials like Aromatic feedstock used for production of Benzene Ortho-xylene, Paraxylene and Toluene, Crude C4, EDC and VCM which are used to produce PVC, Ethylene and Propylene, Clean energy cess on Coal and fuel oil

•           They have suggested that Naphthalene an important input for the specialty chemical sector currently attracts high duty which they wants to be treated at par with comparable chemicals like Benzene – crude and also pure

•           Indian Chlor-Alkali industry has switched to membrane cell replacing mercury cells being used in past. But while replacing membrane cell, which are imported, incur a 10 per cent import duty that increases the maintenance cost. ICC has recommended to eliminate Customs Duty on spares for Chlor-Alkali industry

•           ICC proposes that in order to support the end-use segments custom duty on Rutile Grade Titanium Dioxide used by paint industry and also for dyes and pigment sector should be brought down to 5 per cent form the current 10 per cent

•           Finally they seek Tax-free imports of R&D equipments & consumables (as approved by OST) to the tune of 25 per cent of export earnings so that chemical Industry will also be benefited along with pharma companies are allowed to import R&D equipment

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