February 25, 2000

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Sector report: Petrochemicals

Inputs
Naphtha, ethane, propane and natural gas.

Intermediates
Linear low density polyethylene (LLDPE), low density polyethylene (LDPE), polypropylene (PP), polyvinyl chloride (PVC), polystyrene (PS), polyester staple fibre (PSF), polyester filament yarn (PFY), linear alkyl benzene (LAB), benzene, toluene, purified terephthalic acid (PTA), dimethyl terephthalate (DMT) and mono ethyl glycol (MEG).

Output
Plastic, polyester, synthetic fibres, rubber, detergent, solvents, glycol etc.

Key Players
Reliance, Indian Petrochemicals Corporation, NOCIL and Bombay Dyeing.

Tax Structure

Customs duty (%)
Item	1998-99	1999-2000
Naptha	-	5
Ethylene, Propylene, Butadiene, Benzene and Toulene	15	16.5
HDPE, LLDPE, LDPE, PP, PVC	35	38.5
Excise duty (%)
Item	1998-99	1999-2000
Naptha	15	16
Ethylene, Propylene, Butadiene, Benzene and Toulene	18	16
HDPE, LLDPE, LDPE, PP, PVC	25	24

Background

• Polymer prices rose during 1999-00 as international prices of crude oil spiralled.
• Polymer production also witnessed an upward trend in 1999-00.
• Though there was an increase in the production of synthetic fibres in 1999-00, the rate of growth was lower than in the previous year.
• In the petrochemicals sector, the heavy dependence on imported crude oil (66 per cent of domestic consumption) is an impediment to India's efforts to become self-reliant.

Expectations from the Budget

• Excise duty may see a marginal upward revision.
• The import duty on polyester staple fibre and other major fibres may be reduced from 35 per cent to 20 per cent according to the Indo-European bilateral textile agreement.
• Domestic industry wants peak import duty on polymers to be raised to the bound rate of 40 per cent in line with World Trade Organisation norms and continuation of the surcharge on the 35 per cent slab.

ALSO SEE:

What will Yashwant Sinha do?

How will personal taxes change?

Fiscal report card

SECTOR ANALYSIS:

Automobiles | Cement | Cigarettes | Fertilisers | Hotels | Housing
Mutual funds | Paints | Paper | Pharmaceuticals | Power |
Software | Steel | Tea and coffee

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