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Run-up to the Budget: Downstream petrochemicals sector
Methanol: State of the industry (2000-01)
- Demand for methanol is expected to increase by 10 per cent, largely due to an increase in consumption by Reliance Petroleum's TAME plant and BPCL's MTBE plant.
- Domestic supply is expected to decline as producers have lowered their operating rates due to the shortage of feedstock, natural gas.
- Imports are expected to increase increased significantly over those in 1999-2000, as domestic availability is lower than demand.
- During the April-January 2000-01 period, domestic prices of methanol increased by 50 per cent over those during the corresponding period in 1999-2000. Domestic prices increased in line with international prices. International prices increased due to tight availability and high costs of feedstock, natural gas.
- Margins of domestic producers are expected to increase significantly, due to increase in domestic prices.
VAM: State of the industry (2000-01)
- Demand for VAM is expected to increase by 5 per cent, in line with the growth in the derivative sectors.
- Domestic production is expected to increase due to a decline in imports.
- Imports of VAM are expected to decline due to lower domestic prices as compared with landed cost.
- In the first half of 2000-01, prices of VAM increased due to an increase in international prices. Prices stabilised during the October-December 2001 period.
- During the April-December 2001 period, landed costs of VAM increased significantly, due to an increase in prices in the international market.
- Margins of domestic producers (using feedstock, ethylene, via the petrochemical routes) are not expected to increase, due to an increase in raw material costs.
- Margins of producers using ethylene via the molasses route are expected to increase.
Phenol: State of the industry (2000-01)
- Demand for phenol is expected to increase at 6 per cent, as compared with that in 1999-2000, in line with the growth in the derivative sectors.
- Supply is expected to remain relatively stable.
- During the April-November 2000-01 period, domestic prices of phenol increased due to an increase in international prices. Prices declined marginally in December, along with the decline in international prices.
- During the April-November 2000-01 period, landed costs of phenol increased along with the increase in international prices of phenol.
- Margins of domestic producers are expected to increase, due to an increase in phenol and acetone prices.
Acetone: State of the industry (2000-01)
- Demand for acetone is expected to increase by 5 per cent, as compared with that in 1999-2000.
- Supply is expected to remain relatively stable.
- In the first half of 2000-01, domestic prices of acetone increased significantly, due to an increase in international prices. However, during the September-January 2000-01 period, prices declined.
- Margins of domestic producers are expected to increase due to an increase in the prices of phenol and acetone.
PAN: State of the industry (2000-01)
- In 2000-01, demand for PAN is expected to increase at 4 per cent, as compared with that in 1999-2000, due to a decline in demand from the plasticiser sector.
- Domestic producers are expected to continue to operate at lower capacity, due to a decline in demand and exports.
- During the April-January 2000-01 period, domestic prices of PAN declined due to a decline in PAN prices in the international market, and an oversupply situation in the domestic market. There was a surplus situation in the domestic market due to lower exports.
- Margins of PAN producers are expected to decline, due to a decline in PAN prices and stable prices of raw material.
OX: State of the industry (2000-01)
- In 2000-01, demand for OX is expected to decline by 7 per cent, due to lower production of PAN.
- Availability is expected to decline, in line with the decline in demand.
- In 2000-01, domestic production of OX is expected to increase due to an increase in the operating rates at Reliance Industries' OX plant.
- Imports are expected to decline significantly, due to an increase in domestic availability.
- During the April-January 2000-01 period, domestic orthoxylene prices were stable at around Rs 24,000 per tonne, in line with the international prices.
Carbon black: State of the industry (2000-01)
- Demand for carbon black is expected to increase at around 2 per cent, as compared with that in 1999-2000.
- Supply is expected to increase by 2.5 per cent, as compared with that in 1999-2000.
- In the first half of 2000-01, prices of carbon black were stable. Prices increased by 5 per cent during the September-January 2000-01 period, due to an increase in the prices of carbon black feedstock.
- Margins of domestic carbon black are expected to decline, as the increase in CBFS prices has been significantly higher as compared with the increase in carbon black prices.
MAN: State of the industry (2000-01)
- Demand for MAN is expected to increase by 7 per cent, as compared with that in 1999-2000, in line with the growth in the derivative sectors.
- Supply is expected to remain stable.
- During the April-January 2000-01 period, prices of MAN were stable at the April 2000 levels, in line with the international prices.
- Margins of domestic producers are expected to decline, due to an increase in the prices of raw material, benzene.
LAB: State of the industry (2000-01)
- Demand for LAB is expected to increase at 5 per cent, in line with the increase in demand from the detergent sector.
- Supply is expected to increase at 5 per cent, in line with the increase in demand.
- During the April-January 2000-01 period, domestic prices of LAB increased marginally, in line with the international prices.
- Margins of LAB producers are expected to decline by 4 per cent, due to an increase in the prices of raw material, n-paraffin.
EO: State of the industry (2000-01)
- Demand for EO is expected to increase by 8 per cent, in line with the growth in the derivative sectors.
- Supply is expected to remain relatively stable.
- IPCL operated its new unit in Gandhar in November 2000, in order to meet the temporary deficit in supply due to the shut-down at its Baroda and Nagothane plants.
- In the first half of 2000-01, EO prices declined marginally. EO prices stabilised during the April-January 2000-01 period.
Downstream petrochemicals: Industry expectations from the Union Budget (2001-02)
- A reduction in the customs duty on CBFS: The Association of Carbon Black Manufacturers has been asking for a reduction in the custom duty on carbon black feedstock (CBFS), from 25 per cent to 15 per cent.
- Excise duty on molasses: The Indian Chemical Manufacturers' Association (ICMA) has asked for the replacement of the specific duty of Rs 500 per tonne on molasses, with an excise duty of 16 per cent.
- Extension of the safeguard duty: Domestic phenol producers have asked for the extension of the safeguard duty (at present, at 15 per cent) on phenol.
- Increase in the Special Additional custom Duty (SACD): ICMA has asked for an increase in the SACD, from 4 per cent to 8 per cent on all chemicals.
- ICMA has asked that the duty entitlement passbook scheme (DEPB) be applicable to Advance Release Orders and Advance Intermediate Licence (AIL).
Downstream petrochemicals: Prices & duties
Downstream petrochemicals: Domestic and international prices, and landed cost
|
|
Tariffs |
|
per cent
|
|
Domestic prices |
International prices |
prices |
Landed cost |
|
|
1999-2000 |
|
2000-01
|
|
(Rs/tonne) |
Price type |
Jan 2001 |
Jan 2001 |
|
|
Customs |
Excise |
Customs
|
Excise |
Rs/tonne |
|
$/tonne |
Rs/tonne |
| Orthoxylene |
16.5 |
16 |
21.16 |
16 |
25,500 |
CIF Korea |
400 |
22,987 |
| LAB |
27.5 |
16 |
32.6 |
16 |
56,800 |
CIF Bombay |
900 |
58,968 |
| PAN |
38.5 |
16 |
44.04 |
16 |
33,000 |
FOB Bombay |
470 |
33,291 |
| MAN |
38.5 |
16 |
44.04 |
16 |
45,000 |
FOB Bombay |
900 |
64,056 |
| Methanol |
27.5 |
16 |
32.6 |
16 |
14,900 |
C&F Korea |
221 |
16,370 |
| Phenol |
27.5 |
16 |
32.6 |
16 |
45,500* |
FOB US Gulf |
553 |
44,510 |
| Acetone |
27.5 |
16 |
32.6 |
16 |
36,000@ |
FOB US Gulf |
417 |
40,108 |
| CBFS |
27.5 |
16 |
32.6 |
16 |
7850 |
CIF Bombay |
190 |
12,441 |
| Carbon black |
38.5 |
16 |
44.04 |
16 |
33,300# |
CIF Haldia |
490& |
38,873 |
| VAM |
38.5 |
16 |
44.04 |
16 |
56,000 |
C&F SE Asia |
877 |
59,895 |
# N330 grade
& Weighted average prices
* Landed cost includes, safeguard duty (22 per cent in 1999-2000 and 15 per cent in 2000-01), in addition to the customs duty.
@ Landed cost includes, safeguard duty (28 per cent in 2000-01 and 21 per cent in 2001-02), in addition to the customs duty.
Notes
1) Price type for domestic prices is Ex-factory.
2) In the 1999-2000 Union Budget, MODVAT credit was enhanced from 95 per cent of the excise duty paid on inputs to 100 per cent.
3) For 2000-01, the landed cost and customs duty include the SACD of 4 per cent, effective since 1999-2000. In 1999-2000, the SACD was applicable only for non-traders, and hence, has not been included in the customs duty.
Compiled by CRIS INFAC
Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.
Rediff-CRISIL Budget Impact Analysis
Budget 2001
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