Forward Looking and Growth Oriented Budget for Chemical and Petrochemical Sector

To catch up world’s fast growing economy, the Government of India envisioned for vibrant Chemicals and Petrochemicals industry. India is a net importer of Chemicals and Petrochemicals.  The gap of domestic demand and supply of Chemicals and Petrochemicals is being bridged through imports. To attract investment in the sector, there had been a need of spread in duty structure of raw materials and intermediates/finished products. With this intention the duty structure support is provided for crucial Tariff Lines to become domestic Chemical and Petrochemical industry, globally cost competitive and to become Aatma Nirbhar Bharat.

Chemical and Petrochemical industry has been demanding since long back for reduction in import duty on feedstock such as ‘Naphtha’ to become globally cost competitive for production of Chemicals and Petrochemicals. This long standing demand has been taken care of by the Government in the budget 2021-22. The industry associations of Chemicals and Petrochemicals have termed this Union Budget as forward looking and growth oriented budget. 

The massive emphasis on infrastructure spending is expected to result in additional consumption of petrochemicals like polymers and specialty chemicals. Also, Agriculture focused measure like doubling of outlay for micro irrigation to Rs 10,000 crores will further fuel demand for polymer based irrigation products and services.

The new vehicle scraping policy will boost the polymer and elastomer consumption in anticipation of requirement of new and additional vehicles.

The increased outlay on healthcare and the fund for vaccination will boost polymer consumption with requirements of syringes and other polymer based healthcare products.

In General, with increased government spending the requirement of petrochemicals and polymers which are required in very wide range of sectors will also increase and provide ad fillip to local demand.

The roll out of the PLI schemes for key end-use sectors will boost petrochemical consumption in the country. Among the sectors earmarked, seven sectors like mobile phone manufacturing, auto and components, medical devices, textile products etc., use significant quantity of petrochemicals, the estimated outlay of Rs 1.41 lakh crores augurs well for the petrochemical industry growth.

Government has announced opening up of seven mega textile parks in the country to boost the textile industry. The world is looking for sourcing of textile products from India and buyers will be happy to find alternative to source the product from India rather than focusing of these products from China and other South East Asian countries. This will support entire textile value chain including manmade fiber as a component of value chain by having efficient supply chain and infrastructure made available in these textile parks.

Synthetic Industry has welcomed increase in import duty on raw cotton. This will support farmers to get better remuneration on cotton production and also eliminate cheap imports coming from neighboring countries. As such India is surplus of cotton and rather than exporting cotton.

Industry also welcomes increase in BCD on silk and silk products. Synthetic Industry will be able to substitute silk products silk products by supplying silk like products out of synthetic fibres.

On Naphtha Duty reduced from 4% to 2.5%; decreased custom duty on naphtha is likely to further improve the utilization of crackers resulting in availability of cost competitive olefins and aromatics. Low cost naphtha will also make a way into the availability of ethylene and propylene for petrochemical intermediates in value chain. Further boost to the production of major basic petrochemicals.

On Carbon black Duty increased from 5% to 7.5%; Carbon Black is used in making tyres. With the growth of automobile industry this would lead to new capacity creation of carbon black and also improve capacity utilization of domestic players.

On Builder’s ware of plastics Duty increased from 10% to 15%; It will help in Competitive prices of plastics for local plastic processors against cheaper imports. Further, it will increase in capacity utilization by the plastic processors.

On Polycarbonates Duty increased from 5 to 7.5%; This is used to make shatterproof windows, lightweight eyeglass lenses, etc. The revised duty may attract new investment in the technology intensive polycarbonate market.

On Methylene diphenyl diisocyanate (MDI) Duty increased from NIL to 7.5%; it is being used in the production of polyurethanes for many applications, spandex yarn, etc. The revised custom duty will attract investments in India given the rising demand of polyurethanes and presence of no local players.

The industry and its associations have thanked Union Finance Minister and Union Minister for Chemical and Fertilizers for a positive and forward looking Budget.



    Source PIB