NEW DELHI: The government plans to impose a special duty of 20% on the import of linear alkyl benzene (LAB), a major ingredient for the soaps
& detergents industry, in a move that could hurt domestic detergent producers like HUL, Fena and several others in the small-scale sector.
The move, however, will come as a major boost for petrochemical firms such as Reliance Industries, Tamil Nadu Petrochemicals, Nirma Ltd and Indian Oil Corporation.
The levy called the safeguard duty, which is imposed to stop a surge in imports of a product if it causes ‘injury’ to the domestic industry, has been put in place provisionally for a period of 200 days. It will be imposed once it is notified by the revenue department. The safeguard duty will come over and above the existing 7.5% customs duty applicable on LAB.
The directorate general of safeguards, which carried out the investigation following a complaint filed by domestic manufacturers RIL, Tamil Nadu Petroproducts, Nirma and Indian Oil Corp, has ruled in a notification that preliminary findings showed that the imports of the chemical had caused injury to the domestic producers.
It recommended imposition of 20% safeguard duty on imports and said that any delay in its imposition would cause damage which would be difficult to repair.
The domestic detergent manufacturers are up in arms against the proposal with five importers including Fena filing preliminary objections and 24 manufacturers of soaps and detergents from all over India, both large and small, seeking more time to file their objections. They have been given time till February 6, 2009 to give their submissions before a final determination of the duty.
The provisional duty, however, will be imposed as soon as the revenue department notifies it. It could be extended for a period of three years once the DG safeguards hears all arguments and conclusively proves that the domestic industry has been hurt due to the import surge.
The domestic manufacturers, in their petition to the DG safeguards, claim that they have had to shut down some units producing the chemical late last year as cheap imports had made production unviable. The chemical is imported from Qatar, Saudi Arabia, Switzerland and Iran.
Setting aside arguments raised by detergent producers like HUL and Fena against imposition of safeguard measures, the directorate general of safeguards (a body under the finance ministry dealing with safeguard duties) has ruled that there was a case for imposing the duty on the chemical.
In its notification, DG safeguards pointed out that there was evidence of a surge in imports of the chemical which increased from 21,470 mt (metric tonne) in 2006-07 to 45,405 mt in 2007-08 and continued to show similar trend in later months. There has been a significant increase in share of imports compared to domestic production from 7.25% in the year 2006-07 to 14.27% in the year 2007-08.
On determining injury to the local industry because of the increase in imports, the DG safeguards notification points out that the market share of the local industry (including IOCL) has fallen from 98% in the base year to about 86% in the period of investigation. As compared to the profit of the domestic industry of Rs 100 (indexed) in 2005-2006, there is a loss of Rs 41 (indexed) in 2007-08.
Source : The Economic Times