On 11th July, 2014, the Indian government announced the budget for the coming financial year, whereby, basic custom duty reduction was announced for a host of petrochemical and petrochemicals feedstock. In order to comprehend the effect of this on the Aromatics market in India, Indianpetrochem evaluated the impact of custom duty revision for Reformat and Ortho Xylene.
In the latest Union Budget, the basic custom duty on Ortho Xylene and Reformate is 2.5% reduced from levels of 5% and 10%, respectively.
Typically, BTX (Benzene, Toluene and Xylene) is extracted from Reformate by catalytic reforming. Most of the Aromatic manufactured in Asia is via Reformate as the primary feedstock. However, this isn't the case for the Indian markets whereby, big manufacturers such as Reliance are vertically integrated with upstream Oil and Gas sector. Reliance Industries Limited (RIL), Oil and Natural Gas Limited Corporation Limited (ONGC) and Indian Oil Corporation Limited (IOCL) manufacture Aromatics from crude oil and natural gas, Bharat Petroleum Corporation Limited (BPCL) is one of the few players to purchase Reformate for its refinery in Kochi. However, BPCL doesn't have a significant market share in aromatics to cause any major movement in prices.
Hence, most market participants are of the view that the duty revision of Reformate will not quiver the Indian Aromatics market. A prominent Asian Aromatic manufacturer informed the website, " Most of the upcoming aromatic facility in India, which use Reformate as feedstock , is based in SEZ (Special Economic Zone). SEZ's have complete custom duty exemption. Thereby, this duty revision won't benefit them as well" .
On the other hand, the duty revision of Ortho Xylene, has brought cheer to domestic manufacturers of Phthalic Anhydride (PA). Most PA manufacturers have been under sever margins pressure in the past due to rising feedstock prices and cheap imports.
To this, a Delhi based importer informed, "For Ortho Xylene, RIL primarily caters to the export market and domestically the company mainly supplies to GSFC (Gujarat State Fertilizer and Chemicals Limited), which is then used in high end paint manufacturing. Hence, most Indian PA manufacturers are import depended for their feedstock requirement".
Many market participants feel that the benefit of the duty revision won't completely be passed to the end- customer, instead, the duty revision will help PA manufacturers maintain their margins.
An industry source added, " There is a strong expectation that the operating rate of PA manufacturers in India will rise from average operating rate of 60% to operating rate of 75-80% in the future".
In conclusion, the new Union Budget has positively impacted the PA market in India, while the Aromatic market remains unaffected by the excise duty revision.
(This article was published on the website on July 15, 2014)
In the latest Union Budget, the basic custom duty on Ortho Xylene and Reformate is 2.5% reduced from levels of 5% and 10%, respectively.
Typically, BTX (Benzene, Toluene and Xylene) is extracted from Reformate by catalytic reforming. Most of the Aromatic manufactured in Asia is via Reformate as the primary feedstock. However, this isn't the case for the Indian markets whereby, big manufacturers such as Reliance are vertically integrated with upstream Oil and Gas sector. Reliance Industries Limited (RIL), Oil and Natural Gas Limited Corporation Limited (ONGC) and Indian Oil Corporation Limited (IOCL) manufacture Aromatics from crude oil and natural gas, Bharat Petroleum Corporation Limited (BPCL) is one of the few players to purchase Reformate for its refinery in Kochi. However, BPCL doesn't have a significant market share in aromatics to cause any major movement in prices.
Hence, most market participants are of the view that the duty revision of Reformate will not quiver the Indian Aromatics market. A prominent Asian Aromatic manufacturer informed the website, " Most of the upcoming aromatic facility in India, which use Reformate as feedstock , is based in SEZ (Special Economic Zone). SEZ's have complete custom duty exemption. Thereby, this duty revision won't benefit them as well" .
On the other hand, the duty revision of Ortho Xylene, has brought cheer to domestic manufacturers of Phthalic Anhydride (PA). Most PA manufacturers have been under sever margins pressure in the past due to rising feedstock prices and cheap imports.
To this, a Delhi based importer informed, "For Ortho Xylene, RIL primarily caters to the export market and domestically the company mainly supplies to GSFC (Gujarat State Fertilizer and Chemicals Limited), which is then used in high end paint manufacturing. Hence, most Indian PA manufacturers are import depended for their feedstock requirement".
Many market participants feel that the benefit of the duty revision won't completely be passed to the end- customer, instead, the duty revision will help PA manufacturers maintain their margins.
An industry source added, " There is a strong expectation that the operating rate of PA manufacturers in India will rise from average operating rate of 60% to operating rate of 75-80% in the future".
In conclusion, the new Union Budget has positively impacted the PA market in India, while the Aromatic market remains unaffected by the excise duty revision.
(This article was published on the website on July 15, 2014)
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