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Run-up to the Budget: Polymers sector

Polymers: State of the industry (2000-01)
hdPE

• In 2000-01, demand for hdPE is expected to increase by over 10 per cent, as compared with that in 1999-2000. Demand growth is expected to be restricted due to competition from polypropylene, especially in the injection moulding market. However, growth in demand is expected to be higher in the blow moulding, film and pipe sectors. Demand for hdPE raffia bags is expected to increase due to the dilution of the Jute Packaging Order (JPO).
• Supply increased due to the commissioning of a new plant by Haldia Petrochemicals Ltd. (HPL).
• Imports of hdPE are expected to decline.
• Exports are expected to increase significantly, due to an increase in domestic availability.
• In 2000-01, margins of hdPE producers (integrated and stand-alone) are expected to be lower as compared with those in 1999-2000, as the increase in the prices of feedstocks, ethylene and naphtha, is expected to be higher as compared with the increase in the prices of hdPE.

idPE

• In 2000-01, demand for ldPE is expected to increase by 3 per cent, as compared with that in 1999-2000, due to low growth in the end-use segments and price competition from lldPE.
• Supply is expected to decline marginally due to no new capacity additions.

lldPE

• In 2000-01, demand for lldPE is expected to increase by 15 per cent, as compared with that in 1999-2000. Growth in demand is expected from the packaging and wire and cable sectors.
• Supply increased due to the commissioning of a new plant by HPL.
• lldPE imports are expected to decline.
• Exports are expected to increase significantly, due to an increase in domestic availability.

PP

• In 2000-01, demand for PP is expected to increase by around 16 per cent, as compared with that in 1999-2000. All major end-use sectors of PP are expected to grow at over 10 per cent. Demand from the raffia segment, especially the foodgrain and sugar sectors, is expected to be high, due to the dilution of the Jute Packaging Order (JPO).
• Supply increased due to the commissioning of a new plant by HPL.
• Imports are expected to decline.
• Exports are expected to increase significantly, due to an increase in domestic availability.
• In 2000-01, margins of PP producers are expected to be lower as compared with those in 1999-2000, as the increase in the prices of feedstocks, propylene and naphtha, is expected to be higher as compared with the increase in PP prices.

PVC

• In 2000-01, demand for PVC is expected to increase by over 9 per cent, as compared with that in 1999-2000. Growth in demand is likely to be largely from the pipes, fitting, and wire and cables sectors. However, in the case of bottles, PVC demand is likely to decline due to increased substitution by PET.
• In 2000-01, supply is expected to increase marginally.
• Imports are expected to decline.
• Exports are expected to increase marginally, due to higher domestic production.
• In 2000-01, PVC margins are expected to remain at the 1999-2000 levels, as PVC prices have moved in line with the prices of feedstocks, ethylene and chlorine (as well as VCM).

PS

• In 2000-01, demand for PS is expected to increase by over 17 per cent, as compared with that in 1999-2000, due to an increase in the demand for consumer durables and consumer electronics.
• In 2000-01, supply is expected to be higher as compared with that in 1999-2000, as Pushpa Polymers has been taken over by BASF. (Pushpa Polymers' 60,000 tpa plant was non-operational due to financial problems. The plant is now operational.)
• Imports are expected to decline.
• Exports are expected to increase, due to higher domestic production.
• In 2000-01, margins of PS producers are expected to be higher as compared with those in 1999-2000, as the increase in styrene prices was lower than the increase in PS prices.

Industry expectations from the Union Budget (2001-02)

• A reduction in the customs duty on plastic raw materials: The All India Plastics Manufacturers' Association (AIPMA) is asking for a reduction in the basic customs duty on plastic raw materials, from the existing 35 per cent to 20 per cent. (However, polymer manufacturers have asked for the customs duty to remain at 35 per cent.)
• No change in the customs duty on finished goods: AIPMA has asked that the customs duty on finished goods be maintained at 40 per cent, in order to protect the local small-scale industry (SSI) units.
• Removal of concessions given to Nepal: AIPMA has asked that the concessions offered to Nepal for exports to India be stopped immediately, due to its adverse effect on the Indian plastic processing industry.
• No change in the reservation for SSI units: AIPMA has asked that the existing reservation on plastic items for SSIs be continued.

ABS: Acrylonitrile butadiene styrene; hdPE: High density polyethylene; IM: Injection moulding ldPE: Low density polyethylene;
lldPE: Linear low density polyethylene; PBR: Polybutadiene rubber; PPHP: Polypropylene homopolymer; PS (GP): Polystyrene (general purpose);
SBR: Styrene butadiene rubber.
Includes a 10 per cent surcharge levied on the basic customs duty.

Notes:
1) Domestic prices of polymers & intermediates are market prices.
2) Domestic prices of elastomers & special polymers are ex-factory prices.
3) In the Union Budget 1999-2000, MODVAT credit was increased from 95 per cent of the excise duty paid on inputs to 100 per cent.
4) 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

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Rediff-CRISIL Budget Impact Analysis

Budget 2001

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