Congress gift to Reliance: RIL sole beneficiary of anti-dumping duty on PTA
Moneylife Digital Team 09 April 2014

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.

Comments
M R BANTWAL
9 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
9 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
9 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
9 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?
A Menon
Replied to MR comment 9 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
Replied to MR comment 9 years ago
Yes nobody-nobody can stop this.
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