Reduce customs duty on titanium dioxide to 7.5%: Nadir Godrej

With the new government all set to take charge, CII National Committee on Chemicals has put forth its expectations from the new government for the benefit of the chemical industry. Given below are some of the recommendations for the chemical industry.

 

Paints industry

Manufacture of paint involves mixing of a wide variety of raw materials in various proportions. On an average raw materials account for 56% of the total expenditure in paint companies. Raw materials used can be broadly divided into three major groups - pigments (such as titanium dioxide, zinc oxide etc), solvent (such as mineral turpentine, ethylene glycol), and resins & adhesives

 

Titanium dioxide is the vital pigment used in paints. Pigments and preparations containing 80% or more of titanium dioxide are also used in paints. In the Budget 2012, customs duty on titanium dioxide under CTH 2823 00 10 was reduced from 10% to 7.5% to bring at par with other inputs vide sl. no. 150 of customs notification 12/2012. However, customs duty on this has been again increased to 10% with effect from May 8, 2013. The concessional customs duty of 7.5% needs to be restored to create differential in duty between paints and this vital input. Titanium dioxide also falls under CTH 3206 as pigments and preparations based on titanium dioxide. This is evident from antidumping duty customs notification 85/2009 on titanium dioxide where in both CTH 2823 and 3206 are mentioned. Therefore, customs duty on pigments and preparations of titanium dioxide under CTH 3206 11 also needs to be reduced from 10% to 7.5%.

 

Polymers & plastics

Polymers form an important constituent of the Indian petrochemical industry and are used in the manufacture of parts for many sectors of industry as well as plastic products for use by the public. Polymers of ethylene, propylene, styrene and vinyl chloride falling under tariff headings 3901 to 3904 are known as bulk polymers. Customs duty on these was increased from 5% to 7.5% on May 8, 2013 by amending sl. no. 237 to 240 of customs notification 12/2012. Customs duty on main feedstock naphtha and petroleum gases is 5%. India is not self-sufficient in these feedstocks and depends to a large extent on imports. The high duty of 5% on feedstocks has led to constriction of margins and prevention of fresh investments. Bulk polymers are also being imported under trade agreements signed by India with different countries at lesser customs duty. Examples are:

With a view to reduce the high value of imports of polymers, indigenous industry needs to be encouraged by rationalising the customs duty structure on various inputs. 

 

Feedstocks: In India, about 60% of the cracking capacity of petrochemicals is based on naphtha which is used to produce building blocks like ethylene and propylene. These are further used to manufacture polymers like polyethylene and polypropylene. Customs duty on naphtha is 5% as per sl. no. 130 of customs notification 12/2012. Customs duty on naphtha for manufacture of specified polymers falling under tariff headings 3901 to 3904 was reduced to nil with effect from July 1, 2011 when imported by Haldia Petrochemicals Limited vide sl. no. 129 of Customs notification 12/2012. This concession needs to be extended for all users of naphtha for petrochemicals production. Reformat (aromatic naphtha) is also used as feedstock by the petrochemicals industry and attracts customs duty of 10% which needs to be reduced to 2.5%. Other feedstocks for petrochemicals industry are liquefied gases like natural gas, propane gas, butane gas and ethane and these attract customs duty of 5% which needs to be reduced to 2.5%.

 

Building blocks: Ethylene, propylene and styrene are the main building blocks for polymers and attract customs duty of 2.5% to 5% which needs to be rationalised to uniform rate of 2.5%.

 

Polymer intermediates: Ethylene dichloride (EDC) and vinyl chloride (VCM) are polymer intermediates attracting customs duty of 2.5% and this rate can be continued.

 

Bulk polymers: Bulk polymers falling under tariff headings 3901 to 3904 attract customs duty of 7.5% but allowed for import at lesser duty against various FTAs. Customs duty on these bulk polymers can be continued at 7.5%.

 

Plastic articles: Plastic articles already attracts peak rate of customs duty of 10%. Manufacturers of poly vinyl chloride (PVC) falling under tariff heading 3904 using imported vinyl chloride monomer (VCM) are not able to utilise CENVAT credit of 4% SAD due to low value addition. Same is the case of manufacturers involved in conversion of polycarbonates feedstock into polycarbonate compounds. Exemption of SAD will help these manufacturers to be more competitive.

 

Antimony trioxide

Antimony trioxide is an inorganic chemical and its main application is for flame retardants in combination with halogenated materials which helps to form less flammable chars of polymers. Such flame retardants are also found in electrical apparatus, textiles and coatings. Other application of antimony trioxide is as opacifying agent for glasses, ceramics and enamels. It is also useful catalyst in the production of polyethylene terepthalate (PET plastic) and the vulcanisation of rubber. 

 

The main input for manufacture of antimony trioxide is antimony. China is the main producer of antimony. During 2012-13, India imported antimony worth Rs 5287 lakhs and 96% of import was from China as per data available on Ministry of Commerce. China has imposed additional customs duty of 5% on export of antimony with effect from July 1, 2009 but there is no such duty on export of antimony trioxide. Consequently, users prefer to import antimony trioxide from China. During 2012-13, India imported Rs 10138 lakh antimony oxides from China out of total imports of Rs 11226 lakh.

 

The combined effect of all these makes production of antimony trioxide from antimony unviable in India. This has resulted in underutilisation of capacity of indigenous manufactures of antimony trioxide. Presently antimony attracts customs duty of 5% and its reduction to 2.5% can help the indigenous manufacturers of antimony trioxide.

Recommendations for paints: Reduce customs duty from 10% to 7.5% on titanium dioxide as well as pigments and preparations based on titanium dioxide   Recommendations for polymers and plastics:  Reduce customs duty on naphtha to nil and on other gaseous feedstocks for petrochemicals from 5% to 2.5% Reduce customs duty from 10% to 2.5% on reformat (aromatic naphtha) Reduce customs duty from 5% to 2.5% on ethylene and propylene Exempt 4% SAD on poly vinyl chloride and poly carbonate feedstock Recommendations for antimony trioxide:

Reduce customs duty from 5% to 2.5% on antimony