Congress gift to Reliance: RIL sole beneficiary of anti-dumping duty on PTA

Ignoring plea from domestic users, the Congress-ruled regime has quietly imposed anti-dumping duty on PTA just a week before elections. The sole beneficiary of the duty is Reliance Industries, alleges industry chambers

Just a week before the election, the Indian government has 'quietly' imposed anti-dumping duty on imports of purified terephthalic acid (PTA), a raw material used in producing polyester filament yarn. However, several industry association has alleged that the sole beneficiary of this move is none other than Reliance Industries Ltd. Future growth for PTA is predicted to be extremely high, with demand increasing by about 20% per year.

 

"Domestic user industry is struggling to survive due to wide gap in demand and availability of PTA. Domestic producer is engaging in 'profit booking' by producing naphtha and Paraxylene (PX) in one plant, and then selling PX at artificially high rates to the other plant for the manufacture of PTA. The anti-dumping investigation is also aimed at supplementing this practice of 'profit booking' by the imposition of anti-dumping duty and achieving 'double profit booking'," said Associated Chamber of Commerce and Industry of India (ASSOCHAM) in a note submitted to the government.

 

RIL alone accounted for 60% of domestic PTA production in 2012-13, while Mitsubishi’s MCC PTA India Corp (MCPL) made up for another 24%. Indian Oil Corp is the other domestic producer of PTA. With a capacity to produce 2,050 kilotons per annum (KTA), RIL is 8th largest producer of PTA in the world.

 

What is interesting is RIL and MCPL had asked anti-dumping duty on PTA for imports from China, European Union (EU), Korea and Thailand and not Malaysia, where the Mukesh Ambani-led company owns a plant. Earlier in September 2012, RIL through its unit Reliance Global Holdings Pte Ltd bought BP Chemicals (Malaysia) Sdn Bhd (BPCM) from BP for $230 million. BPCM's PTA plant commissioned in 1996 had nameplate production capacity of 610,000 tonnes per year.

 

Currently, in India, PTA is being imported from China, European Union, Korea and Thailand. According to ASSOCHAM, during 2012-13, the total industry production was 3.48 million tonnes (MT), imports were 6.50 lakh tonnes as against the demand of 4.12 MT excluding captive consumption by PTA producers.

 

According to a report from the Financial Express, RIL is setting up another plant with a capacity to produce one million tonne of the PTA a year, expected to be completed by first half of this year and this would be followed by another plant with the same capacity within six months. "The users said RIL uses most of the PTA for its own consumption. So the duty, if imposed, will raise the costs only for others and distort competition by giving undue advantage to RIL, which also produces finished goods from the PTA," the report said quoting industry sources.

 

In a report, ICIS, said, India, the second largest PTA consumption hub in Asia, is likely to reverse its short supply of PTA in 2014 by boosting its domestic PTA capacity by 56% during the year. Reliance’s new 1.1MT per year Dahej No1 PTA plant would be completed in the second quarter of CY14. "It will be the first new PTA plant in the past three years in Asian region outside of China, except those debottlenecked and rebuilt plants, after the start-up of India’s Mitsubishi Chemical’s 800,000 tonne per year Haldia plant in 2010," the report said quoting an international trader.

 

Even PHD Chamber of Commerce and Industry (PHDCCI) had requested the government not to impose anti-dumping duty on PTA, in view of the demand-supply mismatch, which according to its estimates was 40,96,952 MT against 34,20,000 MT. In a representation sent to the government, Saurabh Sanyal, executive director of PHDCCI, had said, "...it has been highlighted that the domestic producers of PTA are acting in an unreasonable manner to put additional burden on the user industry with the sole objective of earning super normal profits on the product, seeking to impose anti-dumping measures on it at the cost of small and medium sized enterprises which is not fair."

 

According to the Financial Express report, domestic PTA users like Indo Rama Synthetics, Filatex India, JBF Industries and Shubhalakshmi Polyesters opposed a plea by RIL and MCPL to impose anti-dumping duty on PTA.

 

"In a meeting with commerce and industry minister Anand Sharma last week (of March), these companies said imports of the PTA — used in making polyester staple fibre (PSF), filament yarn (PFY) and film — were already taxed at 5% despite a domestic shortage. Thus, an anti-dumping duty over and above the import duty would raise the import tariff to a higher level and would be “disastrous” for the industrial users, which are already struggling to pass on the rising costs to downstream consumers," the report says.

 

DS Rawat, secretary general of ASSOCHAM said, “…if anti-dumping duty was imposed, it will render the imports extremely expensive for purchase by the users of PTA and the user industry in India will become uncompetitive”.

 

The price of paraxylene (PX) increased substantially during 2011-12 and 2012-13 while the price of naphtha (raw material for the production of PX) did not increase at the rate in which prices of PX increased during 2011-12 and 2012-13. However, the increase in prices of Naphtha was commensurate with increase in prices of PTA.

 

According to the industry body, the imposition of anti-dumping duty on PTA will severely curb the production of downstream products such as polyester filament yarn, polyester staple fibre and synthetic textiles. These products also contribute significantly to total exports from India. The EU market may soon be closed to Indian exports of the above products due to the anti-subsidy investigation on PSF imports currently being conducted by EU. PSF exports from India to EU were 63,241 MT in 2012, thus highlighting the significance of exports of only one of the numerous downstream products of PTA.

 

There is an absolute as well as a proportional decline of imports of PTA from China, EU, Korea and Thailand over 2010-11, 2011-12 and 2012-13. In addition, the landed value of PTA from China, EU, Korea and Thailand has increased consistently and substantially over 2009-10, 2010-11, 2011-12 and 2012-13, ASSOCHAM said.

 

The representation of the PHD Chamber also points out that Polyester filament yarn, polyester staple fibre and synthetic textiles form core of the exports from India. Further, Indian polyester staple fibre is already facing anti-subsidy investigation in European Union vide initiation notice (2013/C372/12) dated 19 December 2013.  Egypt has initiated anti-dumping investigations vide notice no. (9) published in their official Gazette no.292 supplementary (A) on 24 December 2013.

 

"The imports of PTA did not cause any injury as claimed by some of the players who want anti-dumping measures on PTA imports.  Even the leading company such as Indian Oil Corporation does not seek anti-dumping duty on PTA imports.  The Chamber, therefore, is of the view that in view of substantial demand supply mis-match of PTA, any anti-dumping measure on it would prove injurious to domestic industry," PHDCCI had said.

 

According to reports, at present landed price of imported PTA stands at about Rs61-Rs62.5 per kg, while domestic producers are selling it even at a slightly lower rate of R60 per kg.

 

Officials from RIL were not immediately available for comments. Our mail remained unanswered till writing the article. We would incorporate RIL views as and when we receive it.

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    COMMENTS

    M R BANTWAL

    6 years ago

    This government and congress and BJP must be put in dust bin basket at the earliest. otherwise they will make the life of others miserable.
    Oh! God give the people good sense during this election 2014

    Vidul Nagda

    6 years ago

    "
    Ignoring plea from domestic users, the Congress-ruled regime has quietly imposed anti-dumping duty on PTA just a week before elections. The sole beneficiary of the duty is Reliance Industries, alleges industry chambers"

    But where is the Government notification which details this anti dumping duty levy. Please clarify.
    [email protected]

    SuchindranathAiyerS

    6 years ago

    AAP says BJP does what Khangress does best? Seems odd. The Ambanis became big like any Indian industrial house: Sharing the wealth thrown at them by the Neta-Babus with the Neta-Babus: http://www.moneylife.in/article/congress...

    MR

    6 years ago

    This is not a new practice. RIL was built on favourable random policy changes by Congress governments - and there are precedents about Congress governments doing such favours just before elections when they knew they will lose. So it is not in jest when Mukeshbhai says that "Congress to apni hi dukaan hai"...they are all his employees.
    Read "The Polyester Prince" for more on Congress-Reliance nexus since the 70s - and how this resulted in the country and us consumers over-paying for cloth, and bankrupting Reliance's competitors because they were end-users of PTA which Reliance sold at profit-gouging prices. This is how our dear President Pranabji made his illustrious career as Finance minister!
    So no surprises here. Question is - How will MoneyLife bring this to national media's attention or tap into Kejriwal to put another corrupt Congress action in front of people?

    REPLY

    A Menon

    In Reply to MR 6 years ago

    Tap into Kejriwal seems to be the one hope that we have at this time - at leastt, he had the guts to file an FIR against the Teflon-coated Mukesh/Reliance! Enough reason to 'strengthen his hands'?

    Rajhans

    In Reply to MR 6 years ago

    Yes nobody-nobody can stop this.

    Does Coal India need to look abroad?

    For Coal India it is more prudent to allocate adequate funds, bring in foreign equipments and experts, and carry out mining operations within the country itself, as there still are unlimited reserves

    Latest reports in the media indicate that in order to achieve power projects capacity of 108,000 mw, it is essential for Coal India Ltd (CIL) to sign fuel supply agreements (FSAs) with 172 units, covering 134 letters of assurance (LoAs), in line with the directives of Cabinet Committee on Investments. Coal supplies have been approved by the Cabinet Committee on Economic Affairs and so far, Coal India has signed 160 FSAs and the balance have to be accounted for soon.  It is expected that during the 11th and 12th Five Year Plan periods, CIL and its subsidiaries should be able to plan and supply the required fuel needs.

     

    Unfortunately, as the details are already in hand, the supplies from Coal India during the fiscal 2013-14 failed to reach the target of 492 million tonnes. The full details were covered in Moneylife couple of weeks ago.

     

    The point at stake continues to be the urgent and imperative need for CIL and its subsidiaries to increase the production and also ensure the importation of high grade coking coal supplies are maintained.  Production of thermal coal has also been falling due to reasons beyond control such as the Phailin cyclone and heavy flooding during monsoon.

     

    In the meantime, it appears Coal India has been receiving overseas proposals from miners, such as Rio Tinto of Australia and others, inviting the Indian giant to participate in their equity. Coal miners all over the world know that Coal India is a cash cow with $7-8 billion in the kitty, who is the world's largest miner. Apart from domestic production, which has been in 472-480 million tonnes range, covering mostly thermal coal, CIL imports practically the entire needs of coking coal, which is a miniscule supply domestically.

     

    Due to the slowdown of economic activities all over the world, particularly in China, coal prices have also come down, as they have large stocks lying in ports, besides their domestic production.

     

    A brief reference to the past year's activity will show that Coal industry, as such has been plagued by delays in delivery, slow and inadequate transportation of coal from pitheads and non-lifting of cargo by power generators and gradation issues that NTPC had with CIL. 

     

    In the meantime, the issue of de-allocation of coal mine blocks and the troubles faced by serious mine owners who have been unable to get "all" clearances to commence mining operations. Till the new government is formed and portfolios are allotted, work in almost all the areas will be coming to standstill, whether we like it or not!

     

    The prime ministerial candidate, Narendra Modi, and his party, have at least made one assurance that there will be "one window clearance!" The investors both indigenous and foreign, at least hope so. This remains to be seen.

     

    The proposal by foreign miners may look attractive. It seems a few proposals are already under consideration by CIL.  It is not an easy task to make a quick decision on such oversea proposals, until an in-depth study of the economies of operation, wage structures, strength and weakness of the currency involved, vis-a-vis the rupee, type of coal produced, its grade, scope for increasing the production to meet the Indian needs apart from the most important element of transportation costs, and if CIL plans to use Indian vessels or acquire some of them, themselves?

     

    The major issue in such equity participation for a layman to ask is, if the miner offering the equity is already "making profits", why do they want to share this? Are they expecting a kind of world-wide fall in coal prices?  Is the price structure linked to the caloric value of the coal presently mined?  Do CIL have adequate technical personnel who will be able to "man" the oversea acquisition? Finally, why not consider such proposal and then make a counter bid for "leasing" the property for 15-20 years?  Some kind of a joint venture in these lines could be thought of.

     

    CIL's desire to own oversea assets is understandable but if these are situated in far off lands, control would become difficult.

     

    While they may still study such possibilities and offers and have them examined by third party experts, it would far more prudent to allocate adequate funds, bring in foreign equipments and experts, and carry out mining operations within the country itself, as India has unlimited reserves of coal.  It will mean great potential for employment to people in the country and also generate income all round.

     

    (AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

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    Was Sun Pharma's Valia betting big on Ranbaxy?
    For months before Sun Pharma decided to buy Ranbaxy for $4 billion, Sudhir Valia, the ED of Sun Pharma, through a partnership firm, has been seen buying stake in Ranbaxy 
     
    Sudhir V Valia, executive director of Sun Pharmaceutical, through his limited liability partnership (LLP) firm has been buying stake in Ranbaxy Laboratories. On Monday, Sun Pharma agreed to buy Ranbaxy for $4 billion. Following the announcement, Ranbaxy shares opened Monday 10% higher and hit its 52-week high at Rs505 on the BSE before ending lower. 
     
    Incidentally, prior to this takeover, there was a sudden and suspicious rise in Ranbaxy’s volumes and prices over six trading days. (Read: Insider trading in Ranbaxy?)
     
    Interstingly, Dilip Sanghvi, the billionaire promoter of Sun Pharma, is brother in law of Valia. A chartered accountant, Valia has been a full time director of Sun Pharma since April 1994. He is also on board of several companies associated with Sun Pharma.
     
    According to information available on the BSE, Silverstreet Developers, a firm in which Valia is one of the partners, has been seen buying stake in Ranbaxy since December quarter. Silverstreet Developers LLP's stake in Ranbaxy was 1.41% as on December 2013 end. The stake increased to 1.64% at the end of March 2014. And days after this, Sun Pharma announced the big takeover. 
     
     
    Japanese Daiichi Sankyo Company Ltd holds 63.41% in Ranbaxy Labs as of March 2014.
     
    It is worthwhile to note that during the September 2013 quarter, Silverstreet Developers did not own a single share in the company, as per the information from BSE. 
     
     
    In a report published on 10 January 2014, Business Standard, quoting market analysts had said, "Silverstreet Developers has acquired the stake in Ranbaxy over the past two or three months. Based on Ranbaxy’s closing price of Rs474.10 on Thursday (9 January 2014) and the current market cap of Rs20,089 crore, the stake acquired by Silverstreet is estimated to be valued at Rs280-Rs300 crore. Although it would not allow the investment firm any prominent visibility in Ranbaxy, it is being observed because of Valia’s interest."
     
    “Ranbaxy is currently a lottery stock. The firm has a few product approvals pending in the US. If it manages those, the stock will bounce back giving its investors huge profits. On the other hand, if the company falters further, it will be a major loss. Given this situation, an interest from an investor such as Valia may indicate better future for Ranbaxy,” the report added quoting an industry source.
     
    Well, Sun Pharma made the lottery turn into a winner for Valia. We send an email to Sun Pharma on Monday whether Valia is could be considered an insider for the purpose of this “lottery” investment. Sun Pharma has so far not responded to our email.
     
    You may also want to read…
     
     
     
     
     
     
     
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    COMMENTS

    Vaibhav Dhoka

    6 years ago

    In India not single guilty paerson is punished therefore it is free for superiors in India.So such things are going to happen after a PAUSE.

    Jose Koshy

    6 years ago

    G8 that you unearthed this, Brilliant research. Also the Delivery statistics for the 3 days will also throw up the inside trading angle, then you have the BTST with a 2 day settlement during the last few days. So hope the SEBI Software can unearth all these and get the Insiders to Books..Like the Rajat Gupta case in the US.

    Anand

    6 years ago

    I think just Mr. Valia didn't appear on BSE website doesn't mean he didn't own even 1 share before December quarter. The list that you have put is only of those shareholders who have more than 1%. The BSE website doesn't have the details of all shareholders.

    REPLY

    Bosco Menezes

    In Reply to Anand 6 years ago

    Very true, Anand. I was going to point out the same.

    However it would be worthwhile for SEBI to follow up on this, as it does raise questions.

    Apurv

    6 years ago

    Please read Regulation 2(c), 2(e), 2(h), 3(i)and 3A of SEBI Prohibition of Insider Trading Regulations, 1992 and you will get the answer.

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