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Budget Measures |
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Rationalisation in import duty of fibre intermediates. Import duty on DMT, MEG, PTA and Caprolactum reduced to 20% from the current 25%.
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Reduction in import duty on polyester chips from 35% to 25%.
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Budget Impact |
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Manufacturers of these downstream products could see a squeeze on their realizations as import prices decline. This however, will benefit the manufacturers of synthetic fibre and yarn. Also, reduction in polyester chips will benefit PET manufacturers. Reliance is integrated along the petrochem chain all the way to fibres and filaments. Consequently, the impact of reduction in fibre intermediate duties maybe insignificant. The company also may not be significantly impacted from reduction in polyester chip duties as it manufactures PET.
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Industry wish list |
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Rationalisation of excise duty. Excise duty on all fibres should be kept at the same level to ensure level playing field. Excise duty on cotton is 8% whereas for synthetic fibres it is 16% leading to a pricing disparity.
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Import duty on crude oil should be reduced. It is amongst the highest in the Asian region. This leads to higher production costs of downstream chemicals.
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Rationalisation of import duty. Petrochemical basic building blocks attract lower duty as compared to naphtha and crude oil. It is the reverse in other countries. Downstream products should attract higher rates of duty.
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Key Positives |
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Key players have initiated consolidation in the industry, which is highly fragmented affecting the industry structure.
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The polymer industry has grown in double digits over the past decade. Further, share of imports in domestic consumption have also reduced.
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Per capita consumption of polyester and polymers is amongst the lowest in the Asian region.
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Key Negatives |
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Crude oil prices rose to $ 30 per barrel. This led to a rise in feedstock prices without a corresponding rise in final product prices. This impacted margins even for integrated players such as Reliance
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Reduction of customs duty in the budget could put pressure on product prices in the future.
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