Budget provisions

The following announcements have been proposed in the Union budget 2014-15

• Inverted duty structure address by reducing customs duties on raw materials
• Basic Customs Duty on denatured ethyl alcohol and methyl alcohol reduced from 7.5% to 5%.
• Basic Customs Duty on crude naphthalene reduced from 10% to 5%.
• Basic Customs duty on reformate reduced from 10% to 2.5%. Basic Customs duty on propane, ethane, ethylene, propylene, butadiene reduced from 5% to 2.5%.
• Excise duty on Polyester Staple Fiber (PSF) and Polyester Filament Yarn (PFY) manufactured from plastic waste or scrap or plastic waste including waste polyethylene terephthalate (PET) bottles (which is already exempt w.e.f. 08.05.2012) is being exempted retrospectively w.e.f. 29.06.2010 to 07.05.2012 and intermediate product ‘Tow’ arising during the course of manufacture of such PSF/PFY is being exempted retrospectively w.e.f. 29.06.2010 to 10.07.2014 so as to provide relief to the manufacturers of such PSF/PFY and to rectify the unintended levy of central excise duty on tow (an intermediate product) arising during the course of manufacture of such PSF/PFY
• Introduction of GST to be given thrust.

Industry Expectations –Partially fulfilled

• Expect import duty on key petrochemical feedstock like Naphtha, Ethane, Propane and Reformate be reduced to 2.5%.
• Expect import tariff on key petrochemical inputs viz. EDC, VCM and Styrene may be brought down to zero.
• Expect excise duty on polymers be reduced to 8% as these are used in several products used by the masses
• Expect plastic products finding use in the agricultural applications like mulch film, drip irrigation system, health protectors such as disposable syringes and products used by students specifically like water bottles, lunch boxes, compass box, erasers, crayons, school bags, toys & sporting goods etc. should be exempt from levy of Excise Duty.
• Expect SAD (special additional duty) may be waived on imports of feedstock and import of monomers by end-use manufacturers.
• Expect to include Natural gas, key petrochemical feedstock as declared goods on which sales tax of more than 5% cannot be levied in any state irrespective of where the product is sold.
• Expect import duty structure on imports of articles of plastics is re-calibrated to increase import duty on plastic goods from current 10 % to 15%
• Expect antidumping duties on PVC and Poly Styrene should be abolished and not levied in future on raw materials for which no adequate supplier base is existing in India.
• Expect reduction of custom duty on Titanium dioxide from 10% to 5% for imports from countries with whom we do not enjoy preferential / nil rate of duty for this product under respective FTAs
• Expect custom duty on Naphtha to be reduced from 5% to Zero for production of Polymers.
• Expect plastic products should be taxed at lowest rate of GST
  

Budget impact

Union Budget 2014-15 has reduced basic customs duty (BCD) on certain items to boost domestic manufacture and to address the issue of inverted duties. This would encourage new investment and capacity addition in the chemicals and petrochemicals sector. The duty reduction in feedstock would strengthen the domestic polymer manufacturing in India making it more competitive leading to surge in exports of finished goods

Stocks to watch

Supreme Industries, Jain irrigation, Sintex Industries, Time Technoplast

Outlook

Union Budget 2014-15 has reduced basic customs duty (BCD) on certain raw material to manufacture polymer/plastic products items will boost domestic manufacturing and to address the issue of inverted duties. This would encourage new investment and capacity addition in the chemicals and petrochemicals sector. The duty reduction in feedstock would strengthen the domestic manufacturing in India making it more competitive leading to surge in exports of finished goods.

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