New petrochem policy in India drops cess on polymer production

23-Mar-07

The chemicals and fertilisers ministry in India has aborted the plan to levy a cess on polymer production to generate resources for a technology upgradation fund (TUF) for plastics. The move follows finance ministry’s objections to tax proposals being part of sectoral policies. Resources would be mobilised from budgetary allocation and from the industry for the proposed plastics technology upgrade fund. A proposal was made for a cess of Rs 100 per ton of polymer production, and was widely viewed as a disincentive for the industry. The chemicals and fertilisers ministry, however, plans to separately suggest a 50% cut in the 16% excise duty on plastic articles in a bid to increase plastic consumption in the country from the current 4.5 kg per person, which compares poorly with the world average of 25 kg per person (30 kg per person for China). The policy also aims to increase the per capita consumption of synthetic fibre from 1.8 kg to 4 kg and polymer consumption from 4 kg to 12 kg. Customs duty on the petrochemical building blocks and synthetic fibre are already low at 5% and 7.5%, respectively, and do not need further rationalisation, said a source. The policy also proposes to set up polymer technology centres at the Central Institute of Plastics Engineering and Technology (CIPET), which has 15 centres across the country. The policy also emphasises on R&D in the sector. A plastic development council would evolve the strategy for promoting the use of the material in various sectors. To increase consumption, the policy promises priority availability of natural gas to companies setting up shop at the proposed Petroleum, Chemicals and Petrochemicals Investment Regions at “globally competitive prices”. The policy also promises to de-reserve the remaining 15-odd plastic articles reserved for SSIs.