DG Safeguards Initiates
Investigation on Phthalic Anhydride Imports on Thirumalai Complaint
[Notice of Initiation of a Safeguard Investigation dated 10th
August 2011]
Sub: Initiation of safeguard investigation concerning imports of Phthalic
Anhydride into India.
An application 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 imposition of Safeguard Duty on imports
of Phthalic Anhydride into India to protect the domestic producers of Phthalic Anhydride
against serious injury caused by the increased imports of Phthalic Anhydride
into India.
2. Domestic Industry
The application 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 imposition of Safeguard Duty on imports of Phthalic Anhydride. The
application has been made by three of the five domestic producers of Phthalic
Anhydride in India accounting for 86% 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, and (4) M/s SI Group India
Ltd., Navi Mumbai Maharashtra, 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, safeguard investigation against imports of Phthalic
Anhydride was initiated vide notice of initiation dated 28th November
2008 published in the Gazette of India, Extraordinary on the same day.
4.1 After expeditious conduct of
investigation preliminary findings were issued on 1st January 2009.
Central Government levied provisional safeguard duty at the rate of 25% with effect
from 29th January 2009 vide customs notification No.9/2009-Cus dated 29th
January 2009 based on the recommendation of DG Safeguard.
4.2 Director General (Safeguard)
issued Final Findings G.S.R. 366(E), dated the 28th May, 2009,
recommending definitive Safeguard duty for a period of three years, i.e. from 29-01-2009
to 28-01-2012. The Central Government however imposed definitive Safeguard duty
for one year only, @ 25% from 29.01.2009 to 30.06.2009 and @15% from 01.07.2009
to 31.12.2009.
4.3 The definitive safeguard duty has expired on 31.12.2009.
Thereafter, no application was filed for review by the domestic industry.
However, the instant application filed by the domestic industry has been for
imposition of safeguard duty for one year with the purpose to enable the
domestic industry to improve its capacity utilization 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 and Taiwan. 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 Q4
of 2008-09 to April-May,2011 remained as under:
Financial Year |
Quarter |
Total Imports (MT) |
Domestic Production (MT) |
2008-09 |
Q4 |
6103 |
49607 |
2009-10 |
Q1 |
7240 |
47985 |
|
Q2 |
5163 |
58259 |
|
Q3 |
8526 |
40437 |
|
Q4 |
7169 |
52853 |
2010-11 |
Q1 |
23615 |
55503 |
|
Q2 |
8611 |
58168 |
|
Q3 |
18082 |
52319 |
|
Q4 |
11657 |
51271 |
2011-12 |
April-May |
9188 |
35716 |
The Imports have increased from
28098 MT 2009-10 to 61965 MT in 2010-11 which shows an increase of 121% which
is phenomenal. Further the import with respect to domestic production was 14.08
% in 2009-10 and increased to 28.52 % in 2010-11.
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: The domestic production has been falling steadily from 58259MT
in Quarter 2 (2010-11), then 52319 MT in Quarter 3 (2010-11) & further to
51271MT in Q4(2010-11) and finally to 50124 MT in Q1(2011-12) .
Year |
|
Index |
Qty (MT) |
2008-09 |
Q4 |
100 |
49607 |
2009-10 |
Q1 |
97 |
47985 |
|
Q2 |
117 |
58259 |
|
Q3 |
82 |
40437 |
|
Q4 |
107 |
52853 |
2010-11 |
Q1 |
112 |
55503 |
|
Q2 |
117 |
58168 |
|
Q3 |
105 |
52319 |
|
Q4 |
103 |
51271 |
2011-12 |
Q1 |
101 |
50124 |
b) Capacity Utilization: Capacity utilization of the domestic industry has declined significantly
in the most recent period, from 87% in Q2 of 2010-11 to 75% in Q1 of 2011-12.
YEAR |
|
Capacity
utilized (%) |
2008-09 |
Q4 |
83 |
2009-10 |
Q1 |
72 |
|
Q2 |
87 |
|
Q3 |
60 |
|
Q4 |
79 |
2010-11 |
Q1 |
83 |
|
Q2 |
87 |
|
Q3 |
78 |
|
Q4 |
76 |
2011-12 |
Q1 |
75 |
The plant of Mysore
Petrochemicals is at present under shutdown for an indefinite period w.e.f
20.06.2011 due to accumulation of high stocks.
c) Share of domestic producers in domestic consumption: Market share of domestic producers
has fallen significantly. Applicants had a market share of 75% in 2009-10 which
fell to 69% during 2010-11. The market share of the applicants further declined
to 64% in Q1 (Apr-May 2011).
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:-
|
Rs. in Lakhs |
Financial Year |
Profitability |
2009-10 |
2583 |
2010-11 (Annualized) |
-1513 |
2011-12 (Q1) |
-384 |
2011-12 (Annualized) |
-1536 |
e) Inventories – the inventories with the
domestic industry have increased significantly. The table below depicts the
inventories level which have witnessed a massive surge from 4530 MT in 2009-10
to 5718 MT in 2010-11 and further to 8131 MT in Q1 (2011-12), almost doubling
in 2011-12 from the 2009-10 level, reflecting the plight of the domestic
industry.
Year |
|
Index |
Qty (MT) |
2008-09 |
Q4 |
100 |
5365 |
2009-10 |
Q1 |
30 |
1604 |
|
Q2 |
114 |
6101 |
|
Q3 |
9 |
487 |
|
Q4 |
84 |
4530 |
2010-11 |
Q1 |
83 |
4468 |
|
Q2 |
46 |
2484 |
|
Q3 |
172 |
9232 |
|
Q4 |
107 |
5718 |
2011-12 |
Q1 |
152 |
8131 |
7. The domestic industry has
requested for immediate imposition of safeguard measures for a period of one
year in their application. The domestic industry’s request for imposition of provisional
safeguard duty for one year is in light of critical circumstances, since
interim measures are imperative in view of steep deterioration in performance
of the domestic industry as a result of increased imports of product under
consideration. The major Chinese market for PAN has clogged for the export
oriented producers of Korea and Taiwan whereas the Indian market is still
strong which led to tremendous increase in imports. The applicants have further
submitted that despite increase in the prices of raw materials, the prices of
PAN remained the same or at times declined. This is due to market pressure
faced by the domestic industry from the increase in imports leading to
financial losses.
8. 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 and such increase in imports has caused
irreparable damage to the domestic industry and accordingly, it has been
decided to initiate an investigation through this notice.
9. 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
10. All known interested parties are also being addressed separately.
11. 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.