The Director-General (Safeguards) has proposed an interim safeguard duty on the import of Phthalic Anhydride (PAN) from South Korea, Israel and Taiwan, widely used to manufacture synthetic resins which act as binders in paint products. PAN also plays a primary role as a chemical intermediate in the production of plastics and polyester resins.
In response to a petition filed by three domestic manufacturers — Thirumalai Chemicals Ltd, IG Petrochemicals Ltd and Mysore Petrochemicals Ltd which account for 87 per cent of indigenous production — the DG (Safeguards) recalled that an investigation initiated earlier by the authorities had led to the imposition of both preliminary and definitive safeguard duty for a span of three years at the rate of 25 per cent, 15 per cent and 10 per cent from January 29, 2009, to January 28, 2012. But, the Central Government, however, imposed definitive safeguard duty for one year only at 25 per cent from January 29, 2009, to June 30, 2009 and at 15 per cent from July 1, 2009 to December 31, 2009.
Although there was a decline in imports in 2009-10 following imposition of provisional safeguard duty, the imports began increasing at a “tremendous rate once the effective period of safeguard duty came to an end,” it said, adding that imports of Phthalic Anhydride have risen in absolute and relative terms and that the increase in imports is “recent enough, sudden enough, sharp enough and significant enough to constitute increased imports.”
Imports up
Stating that since this is a fresh case based on the recent serious injury or threat of serious injury being beset by the domestic industry, the period of investigation has been taken from the fourth quarter of 2008-09 onwards, it said that the import data upto December 2010 has been gleaned from Directorate-General of Commercial Intelligence and Statistics. Imports have increased from 28,098 tonnes in 2009-10 to 61,965 tonnes — showing an increase of 121 per cent in absolute terms. Besides, the import with respect to domestic production too has surged rapidly — from 14.08 per cent in 2009-10 to 28.52 per cent in 2010-11.
The share of imports in the domestic market has gone up from 11 per cent in fourth quarter of 2008-09 to 20 per cent in April to May 2011-12, while the market share of domestic producers in domestic consumption has fallen significantly. The petitioners who enjoyed an average market share of 85 per cent in 2009-10 saw this to fall to 74 per cent in 2010-11.
Referring to public interest issue, the DG said a study of the difference between the selling price of PAN and the main raw material ortho-xylene showed that the prices of PAN remained same or at times fell despite rise in raw material cost. It said this is due to the market pressure faced by the domestic industry from the increased imports, driving the domestic industry to huge financial losses. The domestic price of ortho-xylene has increased from Rs 100 (indexed) a kg in 2010-11 first quarter to Rs 121 (index per kg) in 2011-12 first quarter — an increase of 21 per cent. Plant shutdowns in global markets too have also contributed to limited supply of the major raw material.
Critical circumstances
As safeguard probes are purported to provide protection to the domestic industry in “critical circumstances” such as at this juncture, the DG said as a span of more than one year had elapsed as the definitive safeguard on PAN was levied only once in the past, the imposition of immediate provisional safeguard measures for a period of 180 days could be considered. Accordingly, the DG proposed safeguard duty at the rate of 10 per cent ad valorem to be the minimum required to protect the interest of domestic industry. A call on the proposal would be taken by the Safeguard Boards, comprising Secretaries of Commerce and Revenue.