The Indian government has announced a temporary removal of customs duties on various chemicals and petrochemicals, effective from April 2 to June 30. This reduction eliminates an 8.25 per cent import duty on essential chemicals including methanol, acetic acid, vinyl chloride monomer (VCM), purified terephthalic acid (PTA), monoethylene glycol (MEG), phenol, and styrene. Additionally, major plastics such as polyethylene, polypropylene, polyvinyl chloride (PVC), and acrylonitrile butadiene styrene (ABS) also benefit from this policy.

Authorities believe that this move will alleviate some financial pressures faced by micro, small, and medium enterprises (MSMEs) across the country. Many MSMEs have reported negative impacts from recent market conditions, leading to production cutbacks, loss of revenue, and potential job losses. The ceramic sector in Morbi, for example, has experienced significant disruptions, with nearly half of its units shutting down, impacting an industry valued at Rs 53,000 crore.

Challenges Beyond Costs

Despite the reduction in import duties, experts caution that supply chain issues pose a more significant challenge for businesses. Delays in shipments are being reported due to restrictions in the Strait of Hormuz, a crucial global trade corridor. As a result, even with lower costs, uncertainty surrounding supply continues to be a prominent concern for industries reliant on these chemicals.

The plastic industry is particularly hard-hit, facing a 45 per cent increase in raw material prices and a reduction in production by 40 per cent. With an estimated 30 per cent of its workforce, numbering around 5 million, at risk of losing their jobs, this sector’s struggles are critical and demand urgent attention.

The Ministry of Chemicals and Fertilisers has cited that India relies on imports from the Middle East for approximately 55.1 per cent of its chemical needs. This heavy reliance on a single geographic region raises questions about the robustness and resilience of domestic supply chains.

Import Sources and Market Dependency

According to the latest figures from the Ministry of Chemicals and Fertilisers for 2023-24, other regions also contribute to India’s chemical imports, with the rest of Asia, primarily China, accounting for 33.9 per cent. North America, Europe, and Africa provide smaller shares, standing at 4.9 per cent, 3.8 per cent, and 2.3 per cent, respectively. Such dependency on the Middle East exposes the market to potential supply chain disruptions.

The primary suppliers to India include Oman, China, Saudi Arabia, Iran, Turkey, and Malaysia, along with contributions from the United States and Qatar. Notably, Oman has emerged as the largest supplier, providing over 1.1 million metric tonnes of chemicals.

These chemicals play essential roles across various industries, including alkalis used in glass, textiles, and water treatment, inorganic chemicals for fertilisers and construction, as well as organic chemicals vital for producing plastics and paints. Additionally, pesticides, insecticides, and dyes are included in this vast category of chemical imports, highlighting their importance in the Indian economy.

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