The Business Bytes
TBB BUREAU
NEW DELHI, DEC 28, 2021
In separate representations to the Finance Minister, Revenue Secretary, and the PMO, multiple industry associations have called for an urgent halt to ongoing deliberations to impose anti-dumping duties on the import of caustic soda from the friendly nations of Japan, Qatar, Oman and Iran. The planned additional duties are aimed at countries with whom India shares a warm geopolitical and business relationship, and it is feared that this could be negatively impacted by an anti-dumping duty (ADD) proposed by the Directorate General of Trade Remedies (DGTR).
The plea by the domestic user industries have been raised in reference to the DGTR recommendations for Anti-Dumping investigations concerning imports of ‘Caustic Soda’ originating in or exported from Japan, Iran, Qatar and Oman (Ref: DGTR recommendations dated December 16, 2021, in Case No. AD-OI-30/2020).
Caustic Soda is a key ingredient for multiple large, medium, and small industries in India, including textile, soap & detergent, and alumina producers. These consumers industries are forced to rely on imports as the domestic caustic industry is unable to cater to the bulk requirements for some sectors, which range in shipment sizes of 8000MT to 10000MT. They are also dealing with high tariff barriers through the presence of an inverted duty structure, with caustic soda attracting a 7.5% basic custom duty while alumina attracts a 5% import duty.
Imports of Caustic Soda in India are already restricted through various tariff and non-tariff barriers. Any additional tariffs might help just one segment of the domestic industry, but likely result in irrevocable collateral damage to multiple key sectors, including Textiles, Soap &Detergent, Pharmaceuticals, Aluminium, Drugs Manufacturers, etc. These sectors are highly dependent on imported raw materials including chemicals and products for domestic value addition and contribute to forex earnings for India by means of export of finished products. They also employ millions of people across segments and also provide a thrust for development of other related sectors by supplying critical raw materials/ finished products to downstream industries, which majorly include SMEs.
At this juncture of economic revival, any such tariffs will be detrimental to the sustainability and cost competitiveness of domestic consumer industries which are already amongst the worst-hit, facing lots of hurdles due to the significant rise in input costs across all commodities and disruption in supply chain of critical raw materials. Any further tariffs will hamper the end-consumer industries and household end-users of the finished products due to cost burden and inflationary pressure during the V-shaped recovery phase. The cost escalations for key input material may also lead to a prolonged recovery of such consumer sectors.
Adding to the challenge, the separate production and consumer centres affect operations too. While the major caustic soda producers in India are based in the western states of Gujarat, Maharashtra and Rajasthan and cater largely to consumers in their vicinity, the large alumina producers are concentrated to the eastern part of India, in states such as Odisha, Andhra Pradesh, Karnataka& Jharkhand. This makes transport of caustic soda by road or rail unfeasible as well, leading to safety concerns for bulk transportations via road mode. Given the challenges of the surging high freight costs of transportation along with unavailability of sufficient rakes and network congestion, alumina producers are left with little option but to rely on imports to meet their requirements.
However, Caustic Soda imports in India are already restricted through various tariff and non-tariff barriers. Post imposition of the mandatory BIS license for Caustic Soda imports, almost 95% of foreign Caustic Soda producers are already eliminated because they have not acquired the requisite BIS license for exporting Caustic Soda to India. The BIS Standards are therefore a significant non-tariff trade barrier in place to safeguard the domestic Caustic Soda industry and reduce imports of Caustic Soda based on the quality standards.
As per data from Ministry of Industry and Commerce, there has been a significant decline in Caustic Soda (HS Code 281511 and 281512) imports, even less than during the pre-Covid period. During the current fiscal year 2022, total imports declined by 45%, imports from subject countries declined by 23%, as compared to pre-Covid period, despite full capacity utilization of major consumers like Aluminium and other consumer industries of textiles, soap and detergent. In the last five years(since FY-18), total imports declined by 59%, imports from subject countries declined by 53%.
