Indian chemical industry seeks increase of peak import duty on chemicals from 7.5% to 12.5%

05-Mar-12
The Indian chemical industry has an output of around US$80 bln and ranks 12th in the world while the size of the global chemical industry is in the region of US$ 3 Trillion. Basic Chemicals and Chemical Products (except products of Petroleum & coal) is the single largest group with 14.002% 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% to the GDP. As per Capitaline CSS, the industry primarily consists of basic chemicals and its products, petrochemicals, agrochemicals, specialty chemicals, pharmaceuticals & biotech, paints & varnishes, dyestuff & inks, alco-chemicals, etc. The overall chemical exports market from India grew at a CAGR of 21% from FY2004 to FY2009 while the overall chemical import market grew at a CAGR of 24.3% during the same period. The total investment in the sector is nearly US$ 60 bln and the employment is about one million. It accounts for 13%–14% of total exports and 8%–9% of total imports of the country. Gujarat dominates with 51% of the total share of major chemicals produced in the country. Industry Expectations include: Increase the Peak Import Duty on Chemicals from 7.5% to 12.5% Zero Import Duty on feedstock's (Naphtha and Hydrocarbons such as Ethane, Propane) which currently attract Import Duty of 5% Zero Import Duty on Ethanol from 7.5% Import Duty on Coal and LNG to be reduced from 5% to zero. Import Duty on Fuels (including Furnace Oil/ LSHS etc.) is 10%, which is higher than the Import Duty on most of the chemical products (at 7.5%). While, ideally, fuels need to be made available to Indian industry at international prices and should ideally be eligible for import at Zero duty, Industry at least for roll back of duty to 5%. Industry expects Zero Import Duty on Catalysts. Certain precious metal Catalysts like Nickel or Nickel Compounds, Palladium Copper Chromite and others attract Import Duty of 7.5%, may kindly be reduced to Zero. The Import Duty on Naphtha, which is a basic input, is higher at 5%, while the Import Duty on Paraxylene is Zero. Industry expects the government to correct this anomaly and fix the Import Duty on Paraxylene at 5%. Ethylene, Propylene and other Olefinic monomers like Butene, Octene are derived from Naphtha and currently attracts 5% duty. Since, these are primary building blocks, import Duty on these may be reduced to 2.5%. Benzene, Toluene, Ortho-Xylene, Mix-Xylene, Cumene and Ethyl Benzene are starting points for Organic Chemical Synthesis and presently attract 5% Import Duty. Industry expects the import Duty on these Basic Inputs be maintained at not more than 5% . Capital Goods be made Duty Free or the Import Duty on Capital Goods be brought down to a level not more than 5% . Inputs/equipment of captive power plants and their spares are allowed duty free. Similarly, fuels required for captive power plants may also be allowed at zero rate of duty. Depreciation Rate for Chemical Industry was earlier @ 25% which was brought down 15%. Industry expects that same may be restored to 25%. Extend income tax exemption of 200% of expenditure in R&D beyond 2012 by additional 10 Yrs.
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