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Certificate of Origin:

The Council is authorized by Government of India to issue Certificate of Origin from all four regions i.e. West, South, East & North and the activity is now progressing very well. During the current year, all the Regional Offices of the Council have geared themselves and provided quick services to its members and it is hoped that many more members will come forward and avail the opportunity.

For the year ended 31 March 2009 the income at Mumbai Office for issue of Certificate of Origin is of the order of Rs. 2.10 lakhs. Recently, ICC has invited suggestions from its members for making the services member-friendly. Members input will help ICC in improving the quality of service.

Data Bank on Chemicals:

A Data Bank on chemicals set up in collaboration with Centre for Monitoring Indian Economy is under operation in ICC since April 2006. The data bank is equipped to provide data on chemicals like production, consumption, exports, list of companies manufacturing chemicals and economic data etc. Members are requested to use this facility as much as possible.

ICC Website:

Members are aware that Executive Committee of ICC is considering joining hands with Tata Chemicals Ltd., Tata Group Company for promoting responsible use of chemicals. Accordingly, meetings have been held by members of Task Force set up for this purpose and also media consultant. As a first step, it has been decided to set up a new website substituting existing one. The new site is now under set up through media consultant Turtle & Hare Communication Management & Co. Pvt. Ltd. selected by the Council and the new website address i.e. being considered is www.indianchemicalcouncil.com (also one can log on using .org or .in). Completion of setting up of site will take couple of months.

The main thrust of website will be to showcase chemical industry, create favourable perception among target audiences and provide powerful platform for the industry on policy issues and impact of chemistry on every day life etc.

Efforts will be made to create new avenues for raising resources through Banner advertisements on the site. Interested members may contact the ICC Secretariat for further details.

Monthly Journal - Chemical News:

Thanks to the Editor and the team, the journal is undergoing transformation and now features companies and their leaders who are leaving their footprints on the current history of India's chemical industry. Some of the companies featured in the recent issues are Bilag Industries Ltd, Excel Cropcare Ltd, Godrej Industries Ltd, Gujarat State Fertilizers & Chemicals Ltd, Jacobs H&G Ltd, Shasun Chemicals & Drugs Ltd, Gujarat Alkalies & Chemicals Ltd etc. Members are requested to come forward and write to the Secretariat for featuring their companies in the forthcoming issues and also consider providing advertisement support for the journal. The CHEMICAL NEWS invites the member-companies to send their press briefings for publication besides encouraging their employees to contribute articles in the journal.

Keeping in mind our members going global more aggressively than ever before and the need to be aware of global happenings and pricing trends, ICC entered into Memorandum of Understanding with ICIS, the world's largest information provider for the chemical and oil industry. Every issue starting from August 2006, CHEMICAL NEWS has been publishing ICIS price trends for commodity chemicals and an in-depth analysis for one of the derivatives.

Appointment of new DG, ICC

Mr. H. S. Karangle has now joined ICC as Director General in place of Mr. D. P. Misra who relinquished his charge in January 2009.

Interaction between Indian Chemical Council and Government of India / State Governments:

• Members are aware that ICC had taken up issue faced by the LAB manufacturers regarding availability of feedstock. Mr. Surjit Bhujbal, Director - Petrochemicals, DCPC, Ministry of Chemicals & Fertilizers, Government of India had organized a meeting on 31.3.2008 to discuss the subject. Government was given additional explanation covering following areas :
  • Inclusion of Normal Paraffin along with Linear Alkyl Benzene (LAB) and Heavy Alkylate (HA) in Excise Notification No. 4/2006
  • Inclusion of Other PSU Refineries in addition to Indian Oil Corporation Limited for the receipt of Return Kerosene from Imported Feed Kerosene (Customs Notification 26/99 dt 28.02.1999)
  • Comparative Details of Public Sector and Private Sector Refineries for the manufacture of Paraffin Grade Kerosene
• Government of India has recently finalized the draft Gas Utilisation Policy. The Government has adopted multi-pronged strategy to augment gas supplies and bridge the gap between supply and demand for the domestic market. These cover :
  1. Intensification of domestic E&P activities;
  2. Exploitation of unconventional sources like Coal Bed Methane (CBM);
  3. Underground coal gasification;
  4. Implementation of Natural Gas Hydrate Programme (NGHP) for evaluation of hydrate resources and their possible commercial exploitation;
  5. LNG Imports;
  6. Gas sourcing through transnational gas pipelines.
  As per new guidelines priority has been set up : Fertilizer (Urea) Plants, LPG and Petrochemicals Plants, Power Plants, City Gas Distribution, Refinery and other industries.
  
  ICC has submitted to the Government that Methane has been omitted in "Extraction of Higher fractions (Ethane, Propane, Butane etc.)" mentioned in the policy. Methane is used for producing Methanol, Ammonia and further downstream chemicals such as Formaldehyde, Acetic Acid, Formic Acid, Nitric Acid, Ammonium Nitrate etc. and these chemicals are essential ingredient for consuming sectors like Resin, Polyester, Nitro Aromatics etc.
• Members are aware that Yellow Phosphorus price imported from China has risen from Rs. 100/kg consistently from 2005 - 2007 to Rs. 425/kg, thanks to the unilateral price increase by Chinese producers coupled with imposition of 100% export duty by Chinese authorities. Yellow Phosphorus is used for manufacture of Phosphorus Chemicals which are used for manufacture of pharmaceuticals, agrochemicals, bulk drugs, dyestuffs, fertilizer, flame retardants, water treatment industries etc. At the same time Chinese manufacturers of Phosphorus chemicals not only get elemental Phosphorus at much lower price in China but also product is not slapped with any export duty thereby imported Phosphorus chemicals finding easy market in Indian chemical industry. This becomes threat to the Indian manufacturers of Phosphorus chemicals. It is in that context, the representatives of manufacturers of Phosphorus chemicals like Excel Industries Ltd, Cheminova, Punjab Chemicals, United Phosphorus Ltd, Sabero Organics Ltd, Sandhya Dyes had a meeting in the office of United Phosphorus Ltd and had deliberated the strategy for approaching the Government. DCPC, Government of India had a meeting on 17 July 2008 at New Delhi participated by Mr. R. D. Shroff and Mrs. Sandra Shroff of United Phosphorus Ltd. Following the above meeting, ICC has brought to the notice of Secretary, DCPC, Ministry of Chemicals & Fertilizers suggesting remedial action. It is expected that appropriate decision will be taken in the interest of the industry.
• ICC delegation led by Mr. Samir Somaiya, Chairman - Western Region met Ms. Malini Sankar, Development Commissioner - Industries, Government of Maharashtra and expressed concerns about R&D centre of Dow India coming up near Pune. Commissioner assured that Government will take all the steps for resolving the issue.
• Pursuant to Government of India policy for blending of Alcohol in Gasoline coupled with low production of Industrial Alcohol the Alcohol Based Chemical industry is facing acute shortage of availability of Industrial Alcohol, main raw material for Acetic Acid. Due to shortage of Industrial Alcohol, Rs. 1400 cr. worth of Acetic Acid industry is having a capacity utilization of 30% and 70% of assets are lying idle with consequent result of threatening of layoff of workers. The country is likely to import 400000 MT of acetic acid loosing considerable foreign exchange. This will also be affecting the Downstream units like pharmaceuticals and agrochemical industries. Thus there is a threat to survival of Rs. 4500 crores worth Alcohol Based Chemical Industry.
  
  This has been pointed out to the Minister for Chemicals & Fertilizers & Steel and Government has been requested to allow import of Industrial Alcohol at zero duty.
• The Government of India has notified several products for maintaining cost records and to submit audited cost reports to the Ministry of Corporate Affairs every year. The furnishing of Cost Audit Report may be relevant in the era of controls but now it has lost its relevance in view of economic reforms and opening of economy. General consensus is that Cost Audit needs to be abolished and accordingly, ICC has submitted memorandum for abolition of Cost Audit.
• Government has been informed that Indian industry and ICC have all along held that tariff reduction to a very low level will result in imports flooding India to the detriment of the local industry especially as Indian industry has not been provided level playing situation and has to function with high cost of raw materials and electricity besides poor infrastructure. The tariff structure has to be a fine balance between encouraging import of materials not available in India and avoiding imports of such items which have substantial capacity in the country.
• ICC vide its earlier letter dated 6 February 2008 has requested Government of India to de-reserve Barium Carbonate from the list of items reserved for Small Scale Sector. Recently, Government of India has revised the list and as per recommendations of ICC, Barium Carbonate has been de-reserved.
• ICC delegation led by Mr. Ravi Goenka, Member - Executive Committee, ICC met Mr. Ganesh Naik, Hon'ble Minister for State Excise, Government of Maharashtra on 17 February 2009 and brought to the notice of the Hon'ble Minister the status of the Alcohol based chemical industry in the state of Maharashtra. It was pointed out to the Hon'ble Minister that units are running at 30% of the capacity with MEG and Acetic Acid production completely closed down due to petrochemical base plants outside India exporting products here. Government was requested that earlier decision of the Government of Maharashtra to allocate 65% of the Alcohol production for industrial purpose and 35% for potable purpose should be implemented. Besides, for ensuring that Alcohol based industry receives adequate quantity of raw material levy of not less than Rs. 7/ltr on exports of Alcohol to other states should be introduced. Hon'ble Minister gave very sympathetic hearing and agreed to consider recommendations for levy favourably.
• ICC's Executive Committee meeting was held on 10th March 2009 at Delhi. Mr. Bijoy Chatterjee, Secretary, Department of Chemicals & Petrochemicals, Ministry of Chemical & Fertilizers, Government of India was invited to meet Executive Committee members and have interaction with them. Secretary - DCPC accepted the request and was present for sometime before the meeting. During his presence various issues concerning chemical industry were deliberated. Major issues which were discussed are :

Export Benefits :

Chemical industry export has dwindled substantially. Export becomes uncompetitive compared to China, Korea and other countries mainly because :

1. energy is very costly in India
2. credit availability is poor at the same time interest cost is very high
3. China chemical industry has been recently granted stimulous package which is substantially larger compared to what has been provided in India.
4. Exports to Europe may get affected due to REACh

In view of this members requested following recommendations from the Government :

• Chemical exporters may be provided some benefits which are granted to other exporters namely gems & jewelry and textile sectors
• DEPB rates to be increased by additional 5%
• Credit availability to the chemical sector to be improved and made available at internationally competitive rates
• Some of the incentives provided to Chinese exporters may be made available to Indian chemical industry
• Government should consider subsidizing the cost involved for becoming REACh compliant

Customs Duty:

• Duty on Naphtha and LNG for the chemical sector needs to be reduced to zero %. This is done for fertilizer and power sector but chemical industry is excluded. This anomaly needs to be corrected.
• Alcohol is renewable feedstock for chemical industry and duty on Alcohol also needs to be reduced to zero %.

Safeguard & Antidumping Duty:

• There is surge in import of certain chemicals from China, Taiwan, Korea etc. Besides countries like Columbia, Mexico are also now dumping chemicals into India.
• The procedure for levying these duties is very time consuming.

FTAs :

• FTAs are not in the interest of the chemical industry. Experience with Thailand indicates that Thailand has received maximum benefits compare to India.
• Ethyl Acetate included in the Singapore FTA for import duty, lower duty adversely affected Ethyl Acetate manufacturers.

Excise Duty :

• Government has reduced excise duty to 8% which is good initiative for stimulating demand, however, Molasses which is raw material for Alcohol based chemical industry is still attracts ad valorem duty of Rs. 750/PMT. Excise duty on Molasses should be refined to 8%.
• The excise duty on Polymers has been brought down to 8%, same is at 16% on Naphtha which is the input for the industry. As a result there is a distortion in CVD as well and hence excise duty on Naphtha should be brought down to 8%.

Non-Tariff Barriers :

• Government should support industries' suggestions for non tariff barriers such as :
  • Analysis of impurities in chemicals
  • Import of chemicals through designated ports
  • Labeling in different languages in India

R&D Support :

• Indian chemical industry to become competitive emphasis will have to be on innovation and R&D. Establishment of R&D facilities is very capital intensive. Though India has acquired significant position in speciality chemical sector especially in Pharma and Agrochemicals R&D efforts needs recognition and encouragement from Government. This can come in the form of soft loans at reduced interest rates with longer moratorium period and larger repayment period.

Secretary's response was as follows :

• He appreciated difficulties faced by the industry regarding availability of credit both long term and working capital and for exports. Assurance was given that he will take up the issue at appropriate level.
• Secretary agreed to examine the suggestions regarding custom duty reduction on Naphtha, Industrial Alcohol and excise duty reduction on Molasses and Naphtha.
• Regarding exports to Europe are concerned, he suggested that ICC should indicate precisely as to how the Government should help the exporters in complying with REACH.
• As far as surge in import is concerned, it was said that across the board duty increase is not possible and industry should take up safeguard and antidumping mode for protecting the domestic industry. Secretary assured for quick disposal of such applications.
• Government has agreed in principle to enter FTAs in view of its commitment for globalization, however any specific products which India has manufacturing strength be communicated to the Ministry for exclusion in the FTA.

Accordingly a Task Force has been set up with representatives of Birla Group, Reliance Industries Ltd, Tata Group, Jubilant Organosys Ltd and Hikal Ltd for finalizing suggestions for Pre-Budget Memorandum to the new Government that will be presenting budget hopefully in June 2009.

Crisis in Indian Chemical Industry :

Indian chemical industry is experiencing unprecedented drop in prices of certain chemicals such as Benzene (from $ 1100 to $ 350 per MT), Phthalic Anhydride (from $ 1600 to $ 600 per MT), Maleic Anhydride (from $ 1800 to $ 900 per MT), Ortho Xylene (from $ 1450 to $ 550 per MT), EDC (from $539 to $ 115), PVC (from $ 1320 to $ 600), PP (from $ 2025 to $ 640) etc. As a result the companies in few sectors are holding high value stock and because of the poor demand and fall in prices due to dumping they are experiencing drop in sales and profits. Imports are on rise especially from South Korea, Taiwan, China and Middle East.

To discuss this issue ICC called meeting of CEOs of member-companies and constituted a Working Group comprising of Mr. R. Parthasarathy, Vice Chairman & Managing Director, THIRUMALAI CHEMICALS LIMITED, Mr. S. K. Ray, RELIANCE INDUSTRIES LTD, Mr. Ravi Goenka, Managing Director, LAXMI ORGANIC INDUSTRIES LTD, Mr. Yogesh M. Kothari, Chairman & Managing Director, ALKYL AMINES CHEMICALS LTD and Mr. K. K. Maheshwari, Director, ADITYA BIRLA MANAGEMENT CORPORATION LTD. The Working Group prepared the position paper seeking remedial measures from the Government and took delegation headed by Mr. R. Parthasarathy, Vice President, ICC and met Mr. B. P. Pandey, Joint Secretary - Chemicals, DCPC, Ministry of Chemicals & Fertilizers, Government of India. More than 20 representatives from different sectors attended the meeting. ICC took lead in voicing the concerns of the industry and requested Government of India to consider following relief measures :

• Additional 10% across the board special duty on all chemicals which attracts 7.5% duty except building blocks
• 10% duty on all commodity Polymers, viz , PVC, PP, HDPE,LDPE, PS, Nylon, Polyester
• Duty on Naphtha for chemicals to be reduced from 5% to 0%.
• Import Duty on fuels like Furnace Oil, LSHS, HSD, non-coking Coal, LNG etc. should be reduced to 0%.
• DEPB rates be restored and further increased by 5%
• All FTAs to be put on hold for one year. No new FTAs to be signed

Subsequently, delegation also met Mr. V. S. Sampath, Secretary, DCPC; Dr. Subas Pani, IAS, Secretary Planning Commission; Mr. Ajay Shankar, IAS, Secretary, Department of Industrial Policy and Promotion; Mr. Gopal Krishna Pillai, IAS, Commerce Secretary; Director, Department of Commerce; Mr. P. V. Bhide, Revenue Secretary, Department of Revenue. All the Government officials gave patient hearing and are convinced that Indian chemical industry certainly needs relief measures to face the situation and promised to take appropriate remedial measures.

In the first round of relief measures announced by Government of India, chemical industry did not receive any measures that were expected by the industry.

However ICC delegation continued its efforts and has certainly brought attention of the policy makers to the current status of the industry. As per the reports available in the print media, one can notice that Central Government is looking at various safeguards to protect chemical industry against cheap imports especially from China. We expect that the second round of relief measures to be announced shortly which will include some measures for chemical industry.

DEPB scheme have been extended up to 31 December and DEPB have been restored to the level that was prevailing before November 2008. Subsequently, ICC was advised that the crisis committee set up by the Government of India is very much appreciative of the concerns of the industry. However, our recommendations of imposition additional duty across the board for chemical sector is not accepted by the Government. Instead, Government suggested that ICC members should file safeguard duty applications wherever they are experiencing surge in imports. Government officials has agreed to process our safeguard application on priority basis. Accordingly, Secretariat has advised members regarding safeguard duty procedures. ICC will be organizing two awareness programs on Safeguard Duty at Mumbai and Chennai.

During the interactions with the Government, it was realized that lots of data was demanded regarding production imports, exports of chemical products, level of inventory, capacity utilization, price fall, closures, loss of jobs etc. in support of various arguments. Now for preparing comprehensive report, expenditure was required to be incurred and for meeting the same appeal was made to the members for the contribution. And we are very happy that responses from the members were overwhelming.

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