PRICES of many commonly used consumer products using petrochemical inputs starting from shoe polish to synthetic rubber and textile products as well as various automobile parts using plastics may decline after the upcoming Budget.
The ministry of chemicals and petrochemicals has made a strong case before the finance ministry for a sharp cut in the Customs duty on various building blocks and catalysts used in the chemical and petrochemical industry.
The recommendation is likely to get the concurrence of the finance ministry, for which, keeping inflation under check is a priority as the government is heading for a general election next year.
Although fuel prices are heavily subsidised and fixed by the government, prices of many crude oil derivatives used in the power sector has witnessed a sharp rise recently as oil prices scaled record highs globally. In the last week of September, price of naphtha jumped 9%, aviation turbine fuel by 16% and bitumen by 6%, that saw wholesale price inflation shooting up sharply to 3.75% from 3.01% a week earlier.
The specific proposals now under examination include reducing the Customs duty on furnace oil, naphtha, non-cooking coal and liquefied natural gas and kerosene used for industrial purposes from 10% to 5%. Fuels used at home and sold through the public distribution system already have a low 5% or nil customs duty.
“The department of chemicals & petrochemicals has endorsed a proposal to reduce import duty on fuels required to generate steam and power in chemical plants. The proposal is being considered by the finance ministry,” an official said. Import duty of these fuels is likely to be reduced to the extent that would help Indian industries to retain its competitiveness, the official added. The move is likely to benefit large users such as Reliance Industries, India Glycols and BASF Styrenics.
Naphtha, once converted to ethylene, propylene, butadiene, gasoline and benzene, goes into a wide range of products like polyester fibres, resins, electronic components, perfumes and toothbrushes. Furnace oil is mainly used as a backup fuel for power plants and as the main fuel for small electrical generators.
The other proposals under consideration include slashing the customs duty on all capital power plants and spare parts from 7.5% to 5% in order to encourage low cost capacity expansion, slashing the duty on spare parts of membrane cell plants from 10% to 5% and reducing the duty on naphthalene (used in the dye industry) from 10% to 2.5%. Rationalising the duty on raw materials like platinum, palladium, special grade alumina powder, activated alumina, calcinated alumina, zinc, copper, and cobalt is also under consideration