Indian government mulls fresh import tariffs targeting Gulf producers

16-Aug-10

A year after levying tariffs on polypropylene imports from Saudi Arabia and Oman, the Indian government is considering a new round of import tariffs targeting Gulf producers that receive “unfair” subsidies, possibly leading to renewal of the controversy over the Saudi government’s role in its petrochemical industry, as per C Stanton in thenational.ae. The Gulf Petrochemicals and Chemicals Association (GPCA) called the Indian government’s objections “baseless” as GCC companies are neither dumping products in India nor causing injury to the Indian petrochemical industry, adding that the new Indian import tariffs will be a violation of World Trade Organisation (WTO) rules. The feedstock in the Gulf region, including Saudi Arabia, is lower priced because of obvious commercial reasons, including proximity to the source and low local production and distribution costs. The tariffs expired in January, after which the India’s ministry of commerce and industry reports that Saudi producers benefit from subsidies rather than exporting below production costs. The ministry’s report said the low Saudi domestic price for propane, a high-value fuel produced at refineries and gas plants, created an “unfair advantage” for Saudi chemical companies. The advantage is “entirely on account of the Saudi government intervention of maintaining dual prices for domestic consumption and exports”. The report concluded that Saudi producers of polypropylene paid subsidised prices for propane that gave them a cost advantage of as much as 30% above the advantage associated with their close proximity to oil and gas resources. Exporters located in Saudi Arabia would always have an unfair advantage vis-a-vis the other producers situated overseas entirely on the account of the Saudi government intervention of maintaining dual prices for domestic consumption and exports. The complaint reopens a lengthy argument over the Saudi government’s pricing of feedstock that accompanied the country’s 2005 entrance into the WTO. Its membership agreement with the group allows it to set the price at a level that covers the production cost plus a small profit. India, which is highly dependent on the Gulf for crude imports, should feel a backlash from Saudi Arabia post-Ramadan. The Saudis have a natural advantage in feedstock and they have the WTO-granted right to use it.