Petrochemicals Industry
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Budget provisions |
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Reduction in the basic excise duty for polymers (viz. Poly Vinyl Chloride, Polypropylene, Polyethylene) from 24% to 16%
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Reduction in the basic duty for Linear Alkyl Benzene as well as basic petrochem products (paraxylene, ethylene and propylene) from 18% to 16%
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No change in import duties for petrochemical input (naphtha), intermediates as well as final product (polyester or polymers).
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Budget impact
The reduction in the excise duty for polymers would benefit both the commodity plastic manufacturers Reliance as well as IPCL.
The big negative impact of Reliance will however come from the spread of the direct tax net which comes through imposition of the Minimum Alternate Tax of 7.5%.
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Industry wish list |
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The duty on polyester filament yarn at 33.6% is in the higher tax bracket and this can also be rationalised to a level of 20% which would boost demand.
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Import duties for plastics (polyethylene, polypropylene, polystyrene and PVC), polyester fibre, polyester yarn and fiber intermediates should not be reduced as they are already below WTO levels i.e.40%
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Excise duties on plastics should however be reduced to 16% (from the levels of 24% prevalent currently). This would boost demand as well as capacity utilisation within the industry and would not have a negative impact on the government revenues.
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Key Positives |
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The domestic product prices have broadly tracked the international rise in prices. While fibre intermediate prices have on an average gone up by 30% plus during the first nine months of the current financial year, PVC prices are up 36%.
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Key Negatives |
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Crude oil price rise to $ 27 per barrel, seems to be unabated. This is likely to hit feedstock prices and thereby impact margins even for integrated players such as Reliance
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Impending reduction of the customs duty in the budget could put pressure on product prices in the future.
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