Financial Daily from THE HINDU group of publications
Sunday, Mar 03, 2002
Financial Daily from THE HINDU group of publications Sunday, Mar 03, 2002 |
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Investment World
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Petrochemicals Industry & Economy - Petrochemicals Petrochemicals: Stress across the board
THOUGH there are no direct proposals in the Budget as far as major petrochemical products go, there is likely to be an overall impact from the drop in peak duty rates from 35 per cent to 30 per cent. This means that the protection will be lower henceforth for the two main petrochemicals producers — Reliance Industries and Indian Petrochemicals Corporation. The drop in duty rates comes at a time when global prices for polymers and fibre/intermediates are soft. The slowdown in demand in the domestic market has only added to the industry's woes. The two producers may have to drop their selling prices to align with the new lower landed costs. This may affect their margins — already under considerable pressure. The full impact of this move would be felt from the first quarter of the next fiscal year. The imposition of special additional duty (SAD) of 4 per cent on the import of kerosene for the production of N-Paraffin, an intermediate in the linear alkyl benzene (LAB) production process, is likely to affect Tamilnadu Petroproducts and Nirma adversely. Both producers of LAB import either the whole or a part of their kerosene requirements. The SAD imposed now will push their raw material costs upwards and impact margins. The doubling of import duty on paraxylene from 5 to 10 per cent is likely to hit Bombay Dyeing and Mitsubishi PTA hard. The company imports its requirements partly sourcing the rest from Reliance Industries. Paraxylene is a critical raw material for the production of fibre intermediates, di-methyl terephthalate (which Bombay Dyeing produces) and purified terephthalic acid (PTA), which is produced by Reliance and Mitsubishi in the country. Consequent to the rise in paraxylene import duty, Reliance could push up its PTA prices. This would affect Indo Rama Synthetics adversely as it sources its PTA from Reliance Industries.
BL Research Bureau
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