DG Safeguards Initiates
Review on Phthalic Anhydride (PAN), Three Producers Seek One More Year of 10%
Duty to Face Import
[Safeguard
Initiation Investigation F.No. D-22011/14/2012 dated 26th October
2012]
Sub:
Review of safeguard Duty on imports of Phthalic Anhydride(PAN) into India under
provisions of Section 8B(4) of Customs Tariff Act, 1975 read with Rule 16 and
Rule 18 of Customs Tariff(Identification and Assessment of Safeguard
Duty)Rules, 1997.
An application for review and extension of
safeguard duty has been filed before me under Rule 5 of the Customs Tariff
(Identification and Assessment of Safeguard Duty) Rules, 1997 by M/s.
Thirumalai Chemicals Ltd., Ranipet, Tamilnadu, M/s. IG Petrochemicals Ltd.,
Raigad, Maharashtra, M/s. Mysore Petrochemicals Ltd, Raichur, Karnataka for
continuation/extension of Safeguard Duty on imports of Phthalic Anhydride(PAN)
into India after expiry of the existing safeguard duty to protect the domestic
producers of Phthalic Anhydride(PAN) against serious injury caused by the
increased imports of Phthalic Anhydride(PAN) into India.
2. Domestic
Industry
The application dated 7th September, 2012
has been filed by M/s Thirumalai Chemicals Ltd., Ranipet, Tamilnadu, M/s. IG
Petrochemicals Ltd., Raigad, Maharashtra, M/s. Mysore Petrochemicals Ltd.,
Raichur, Karnataka for continuation/extension of Safeguard Duty on imports of
Phthalic Anhydride(PAN). The application has been made by three of the five
domestic producers of Phthalic Anhydride(PAN) in India accounting for 88% of
the total production.
3. Product
Involved
The product under consideration is Phthalic
Anhydride. It is an anhydride of Phthalic Acid, and is commercially produced by
catalytic oxidation of Ortho- xylene or Naphthalene. It is a colourless solid,
variously referred as Phthalic Anhydride flakes, Phthalic Anhydride (98% min.),
Phthalic Acid Anhydrous, Phthalic Anhydride (99.8% min), etc. The product is
produced only in one grade, though, it may be consumed as a solid or liquid in
processes it is used. As regards different applications, it does not have
distinguishable different types or forms. Further, it is used in production
process of various chemicals, which use the same characteristic properties of
Phthalic Anhydride. Phthalic Anhydride is used to produce Phthalate esters,
which function as plasticizers. It is an important chemical intermediate in
plastic industry. Phthalic Anhydride is classified under Customs sub-heading
No. 29173500 under the Customs Tariff Act, 1975.
4. Brief history
An investigation was initiated by the DG (safeguards)
earlier on the application filed under Rule 5 of the Customs Tariff
(Identification and Assessment of Safeguard Duty) Rules, 1997 [hereinafter
referred to as “Safeguard Rules”] by (1) M/s. Thirumalai Chemicals Ltd, Ranipet
Tamilnadu, (2) M/s. IG Petrochemicals Ltd Raigad Maharashtra, (3) M/s. Mysore
Petrochemicals Ltd, Raichur Karnataka, seeking imposition of Safeguard Duty on
imports of Phthalic Anhydride into India alleging that increased imports of
Phthalic Anhydride was causing and/or threatening to cause serious injury to
the domestic producers of Phthalic Anhydride in India. Having satisfied that
the requirements of Rule 5 of Safeguard Rules ibid were met, safeguard
investigation against imports of Phthalic Anhydride was initiated vide notice
of initiation dated 10th August, 2011 published in the Gazette of
India, Extraordinary on the same day.
4.1 After
expeditious conduct of investigation preliminary findings were issued on 23rd
September, 2011. Central Government levied provisional safeguard duty for a
period of 180 days at the rate of 10% with effect from 17th January 2012 vide
customs notification No.1/2012-Cus(SG) dated 17th January 2012 based on the
recommendation of DG Safeguard.
4.2 Director
General (Safeguard) issued Final Findings G.S.R. 263(E), dated the 29th March,
2012, recommending definitive Safeguard duty for a period of one year, i.e.
from 17-01-2012 to 16-01-2013. The Central Government imposed definitive
Safeguard duty for one year @ 10% from 17.01.2012 to 16.01.2013 vide customs
notification No 3/2012-Cus(SG) dated 29th May, 2012.
4.3 As
mentioned above, the safeguard duty is in vogue till 16th January, 2013.
However, the instant application has been filed by the domestic industry for
continuation/extension of safeguard duty for a further period of one year from
the date of expiry of existing duty, with the purpose to enable the domestic
industry to improve its competitiveness in order to survive.
5. Increased
Imports
Phthalic Anhydride is imported into India
from a number of countries, and primarily from Republic of Korea, Israel, Iran,
Taiwan, China and Russia. The imports of Phthalic Anhydride have shown an
increasing trend in absolute terms as well as compared to the domestic
production. The imports and domestic production of Phthalic Anhydride during
2009-10 to Q1 of 2012-13 remained as under:
|
Year |
Unit
of quantity |
|
Total
Imports |
|
2009-10 |
MT |
|
28098 |
|
2010-11 |
MT |
|
61241 |
|
2011-12
(Q1) |
MT |
9752 |
|
|
2011-12
(Q2) |
MT |
12892 |
|
|
2011-12
(Q3) |
MT |
7792 |
|
|
2011-12(Q4) |
MT |
7983 |
|
|
2011-12
(Total) |
MT |
|
38419 |
|
2012-13
(Q1) |
MT |
12907 |
|
|
2012-13
(Annualized) |
MT |
|
51628 |
(Source : Figures from 2009-10 to Feb 2012
are from DGCIS data received in the Directorate and from March 2012 to June
2012 are from IBIS as provided by the applicant )
The Imports have increased from 7983 MT in
Q4 of 2011-12 to 12907 MT in Q1 of 2012-13 which shows an increase of 62% which
is phenomenal. Further, imports as a percentage to domestic production have
increased from 13.54% in Q4 of 2011-12 to 23.64% in Q1 of 2012-13.
6. Injury
The applicant have claimed that the
increased imports of Phthalic Anhydride have caused and are threatening to
cause serious injury to the domestic producers of Phthalic Anhydride as
indicated by the following factors:
a) Production:
|
YEAR |
|
Index |
QTY(MT) |
|
2009-10 |
Q1 |
100 |
47985 |
|
|
Q2 |
121 |
58259 |
|
|
Q3 |
84 |
40437 |
|
|
Q4 |
110 |
52853 |
|
Total |
|
|
199534 |
|
2010-11 |
Q1 |
116 |
55503 |
|
|
Q2 |
121 |
58168 |
|
|
Q3 |
109 |
52319 |
|
|
Q4 |
107 |
51271 |
|
Total |
|
|
217261 |
|
2011-12 |
Q1 |
104 |
50124 |
|
|
Q2 |
107 |
51346 |
|
|
Q3 |
114 |
54736 |
|
|
Q4 |
123 |
58918 |
|
Total |
|
|
215124 |
|
2012-13 |
Q1 |
114 |
54576 |
It is seen that production of domestic
industry has fallen to 54576 MT in Q1 of 2012-13 from 58918 MT in Q4 of
2011-12. This shows that domestic production has shown a downward trend in
first quarter of 2012-13, despite imposition of safeguard duty on the product
wef 17 Jan 2012.
b) Capacity Utilization:
|
YEAR |
Quarter |
Capacity
utilized (%) |
|
2009-10 |
Q1 |
72 |
|
|
Q2 |
87 |
|
|
Q3 |
60 |
|
|
Q4 |
79 |
|
Average
for 2009-10 |
|
75 |
|
2010-11 |
Q1 |
83 |
|
|
Q2 |
87 |
|
|
Q3 |
78 |
|
|
Q4 |
76 |
|
Average
for 2010-11 |
|
81 |
|
2011-12 |
Q1 |
75 |
|
|
Q2 |
77 |
|
|
Q3 |
82 |
|
|
Q4 |
88 |
|
Average
for 2011-12 |
|
81 |
|
2012-13 |
Q1 |
81 |
Capacity utilization of the Domestic
Industry has fallen to 81% in Q1 of 2012-13 from the preceding quarter Q4 of
2011-12 when it was 88%. Therefore, despite levy of safeguard duty on imports
during this period, the capacity utilization has not improved.
c) Share of domestic producers in
domestic consumption:
|
|
|
Imports
(MT) |
Domestic
Sales by Industry (MT) |
Sale
of other producers (MT) |
Consumption
in India (MT) |
Market
share of DI |
|
2009-10 |
Q1 |
7240 |
35530 |
5930 |
48700 |
73% |
|
|
Q2 |
5163 |
41289 |
5930 |
52382 |
79% |
|
|
Q3 |
8526 |
39427 |
5930 |
53883 |
73% |
|
|
Q4 |
7169 |
40696 |
5930 |
53795 |
76% |
|
TOTAL |
|
28098 |
156942 |
23720 |
208760 |
75% |
|
2010-11 |
Q1 |
23615 |
39817 |
5938 |
69370 |
57% |
|
|
Q2 |
8611 |
51007 |
5938 |
65556 |
78% |
|
|
Q3 |
18082 |
38941 |
5938 |
62961 |
62% |
|
|
Q4 |
10933 |
44553 |
5938 |
61424 |
73% |
|
TOTAL |
|
61241 |
174318 |
23752 |
259311 |
67% |
|
2011-12 |
Q1 |
9752 |
38149 |
7659 |
55560 |
69% |
|
|
Q2 |
12892 |
46947 |
7659 |
67498 |
70% |
|
|
Q3 |
7792 |
42886 |
7659 |
58337 |
74% |
|
|
Q4 |
7983 |
49748 |
7659 |
65390 |
76% |
|
TOTAL |
|
38419 |
177730 |
30636 |
246785 |
72% |
|
2012-13 |
Q1 |
12907 |
46884 |
7367 |
67158 |
70% |
From the above table, it is evident that
the share of domestic industry in domestic consumption of Phthalic Anhydride
has fallen to 67% in 2010-11 from 75% in 2009-10. It has slightly increased to
72% in 2011-12, but still less than the base year 2009-10. Further, it has
declined to 70% in Q1 of 2012-13 from 76% in Q4 of 2011-12.
d) Profit/loss – the profitability of the domestic
industry has steeply deteriorated to such a situation that the domestic
industry is now suffering financial losses. This is evident from the table
below:-
|
Financial
Year |
Profitability
(Indexed) |
|
2009-10 |
100 |
|
2010-11 |
-39 |
|
2011-12 |
-177 |
|
2012-13
(Q1) |
47 |
Profit of DI have fallen to 47(Indexed) in
2012-13 Q1 from 100(Indexed) in 2009-10. In between, the DI has suffered losses
of 39(Indexed) in 2010-11 which mounted to 177(indexed) in 2011-12, which
includes a quarter when safeguard duty was leviable.
e) Inventories –
|
YEAR |
|
Index |
QTY(MT) |
|
2009-10 |
Q1 |
100 |
1604 |
|
|
Q2 |
380 |
6101 |
|
|
Q3 |
30 |
487 |
|
|
Q4 |
282 |
4530 |
|
2010-11 |
Q1 |
279 |
4468 |
|
|
Q2 |
155 |
2484 |
|
|
Q3 |
576 |
9232 |
|
|
Q4 |
356 |
5718 |
|
2011-12 |
Q1 |
507 |
8131 |
|
|
Q2 |
235 |
3774 |
|
|
Q3 |
58 |
932 |
|
|
Q4 |
223 |
3579 |
|
2012-13 |
Q1 |
273 |
4381 |
From the table above, it is
evident that inventories have increased to 4381 MT in Q1 of 2012-13 from 932 MT
in Q3 of 2011-12.
7. The application has been examined and it has been found that prima
facie increased imports of PAN (Phthalic Anhydride) have caused and are
threatening to cause serious injury to the domestic producers of PAN despite
levy of safeguard duty to the extent of 10% wef 17 January 2012 and such
increase in imports has caused irreparable damage to the domestic industry.
Accordingly, it has been decided to initiate a review investigation through
this notice, for continuation/extension of safeguard duty on Phthalic
Anhydride.
8. All interested parties may make their views known within a period
of 30 days from the date of this notice to:
The Director General (Safeguards)
Bhai Vir Singh Sahitya Sadan:
2nd Floor,
Bhai Vir Singh Marg,
Gole Market, New Delhi-110 001,
INDIA.
Telefax: 011-23741542/ 23741537
E-mail: dgsafeguards@nic.in
9. All known interested parties are also being addressed separately.
10. Any other party to the investigation who wishes to be considered as
an interested party may submit its request so as to reach the Director General
(Safeguards) on the aforementioned address within 21 days from the date of this
notice.