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Govt plans stimulus package for chemical industry

By Ajay Modi in New Delhi
March 06, 2009 11:28 IST
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Days after announcing excise duty cuts on commodities like steel and cement, the government is working on a plan to provide a major stimulus to the chemicals and petrochemicals industry by revising Customs/excise duty on inputs required by the industry.

The proposals under consideration include waiving the current 5 per cent Customs duty on naphtha and reducing the excise duty on mono ethyl glycol from 8 per cent to 4 per cent.

The Cabinet secretariat has sought views from various ministries and departments for this package. "The chemical sector is one of the sectors that have been adversely affected by the global economic crisis," the department of chemicals and petrochemicals has observed.

Drastic fall in prices, slump in export orders and a substantial slowdown in demand in the domestic market have forced the chemical industry to curtail expansion plans and operate at lower capacities.

Grasim, which manufactures viscose staple fibre for the textile industry, saw sales volume decline by 22 per cent in the third quarter. Consequently, the company has decided to scale down production.

With the crash in crude oil prices from $147 per barrel in July 2008 to $40-45 levels now, prices of all chemicals, solvents, polymers and petrochemicals have also fallen sharply.

Currently, prices of many chemicals are prevailing at the 2002-03 levels, according to industry experts.

The above measures have been proposed following the department's interaction with industry associations, including the Chemicals and Petrochemicals Manufacturers Association, All-India Plastic Manufacturers Association, Indian Chemicals Council, Association of Synthetic Fibre Industry and Alkali Manufacturers Association of India.

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Ajay Modi in New Delhi
Source: source

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