Petrochem industry fears unfair competitive advantage in FTA with the Gulf

31-Dec-07

Fearing unfair competitive advantage, a leading industry body has urged the government to keep key petrochemical products like ethylene and linear low-density polyethylene (LLDPE) outside the purview of the proposed free trade agreement with the Gulf Cooperation Council (GCC). GCC is a customs union comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). As a bloc, GCC is India's third largest trading partner after the European Union and the US. Indian manufacturers are at a disadvantage because key inputs like feedstock are available in GCC countries at subsidised rates, as per a statement by Associated Chambers of Commerce and Industry of India (Assocham). The governments in the GCC provide natural gas to their petrochemical industry for using as feedstock at a subsidised price of $0.75 per mln British thermal unit (MMBTU), while prevailing prices in the international market are in the range of US$15 per MMBTU. This leads to a significant difference in the average production cost of these petrochemicals in India and GCC countries - Production cost of ethylene in India works out to US$697 per metric ton as compared to just US$143 per MT in Saudi Arabia. This amply demonstrates that Indian ethylene manufacturers are at a 281% cost disadvantage vis-a-vis their Saudi counterparts. Manufacturers of low-density polyethylene (LDPE), high-density polyethylene (HDPE) and polypropylene (PP) also face similar cost disadvantage with respect to their counterparts in GCC countries.