The Union ministry of commerce has issued a notification recommending a provisional anti-dumping duty on polypropylene (PP) imported from Saudi Arabia, Oman and Singapore. This follows an appeal by Reliance Industries, supported by Haldia Petrochemicals Ltd (HPL), in December last year, the only two producers of the commodity in the country.
The ministry has recommended a range of duty on imports from these countries. For PP from Oman, the duty will vary from 29.31 per cent to 243.7 per cent in case of non-cooperative producers and exporters, for Singapore it will range from 5.08 per cent to 235.35 per cent, and finally, for Saudi Arabia it will from 1.89 per cent to 185.68 per cent. Presently, there is a customs duty of 5 per cent on the import of the commodity.
The directorate general of anti-dumping and allied duties noted in the notification: “The profitability of the domestic industry was adversely affected during the period of investigation. During this period, while the cost of sales was 148 (indexed) with 2005-06 as the base year, the selling prices could rise only from 100 to 127 during the corresponding period. In short, the domestic industry could not raise prices in proportion to the increase in costs during the period of investigation. As a consequence, there was a sharp decline in the profitability.”
When contacted, the director general of anti-dumping and additional secretary of the ministry of commerce, R Gopalan, confirmed the development.
Industry sources indicated that Reliance and HPL had applied for a 19-23 per cent anti-dumping duty, and an investigation was started during February last. The provisional anti-dumping duty would be applicable for six months, during which the hearing will continue before the director general of anti-dumping duty. If found that the domestic industry has not been hurt, the provisional levy could be withdrawn and the importers be refunded on the extra duty paid during the period. Else, the duty could be extended up to five years.
The local processing industry is apprehensive about the impending duty, and expects prices to rise significantly. “In some cases, the amount of anti-dumping duty alone on the commodity is around $1,033 per tonne and on top of that there is a 5 per cent customs duty. The price of the product in the international market is around $1,100, and this would mean the price of imported PP would practically double, making imports unviable,” K D Agarwal, president of the All India Flat Tape Manufacturers Association, that was a party to the ministry of commerce’s investigation, said.
PP is used as a raw material in a variety of industries, including packaging, woven sacks, containers, auto-components, pipes, water tanks, furniture, medical appliances, among others. Most of the units associated with processing are small and medium enterprises (SMEs) and feared that a price rise in the domestic market could hurt them.
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A senior official of an industry association of plastic processors informed that presently around 15-20 per cent of the domestic requirements were imported. Many processors felt that now they would find it difficult to source raw material, as only two companies — Reliance and HPL — produced it.
A senior official at HPL said, “Anti-dumping duty is completely compatible with WTO norms. Some countries like Saudi Arabia already have a customs duty of 12 per cent to protect their domestic industry. Some exporters from countries that did not have a huge domestic market were quoting lower than the market prices to sell their products here in India after China cut its purchases of PP last year. This has not only affected the domestic Indian industry, but has also de-stabilised the entire price dynamics In the Asian countries.”
He added that most processors were waiting for prices to bottom out, and were functioning on zero inventory last year. Prices had gone down from $1,300 per tonne to $550 per tonne in November last year, when Reliance had to shut down its plant for around four weeks and HPL functioned at 25 per cent capacity. Presently, prices of PP are hovering around $1,050-1,100 per tonne and HPL is back in full production. “India manufactures enough PP annually to cater to the domestic demand, but at times there is a shortage in particular months when the processors suddenly place huge demands”, the HPL source claimed.
Presently, India has a PP capacity of around 2.84 million tonnes per annum (tpa) boosted by Reliance’s addition of 900,000 tpa at its Jamnagar facility in Q4’08. HPL, in comparison, has a much lower capacity at 2.75 lakh tpa. Its Haldia plant that was closed for a routine maintenance for 21 days last month is now running.