India has reinstated a 7.5 percent customs duty on a wide range of petrochemical imports after the expiration of a temporary exemption, raising fresh questions for manufacturers and downstream industries dependent on these critical inputs.
Background: Exemption amid global turmoil
Earlier this year, the Indian government had moved to suspend basic customs duties on more than 40 core chemical and polymer products. According to the Ministry of Finance, this decision was prompted by severe disruptions in global supply chains, particularly due to escalating conflict and logistical constraints in the Middle East. The temporary waiver, which began on 2 April, was initially set to end on 30 June but was extended for another 15 days as a transition measure, expiring on 15 July.
Key products and sectors impacted
The list of exempted products covered an extensive range of raw materials and intermediates vital to India’s plastics, textiles, automotive, and packaging sectors. Notably, the affected items include anhydrous ammonia, toluene, methanol, monoethylene glycol (MEG), purified terephthalic acid (PTA), vinyl chloride monomer (VCM), phenol, acetic acid, as well as polymers like polyethylene, polypropylene, polystyrene, PVC, PET, polyols, polyurethanes, and epoxy resins. These products form the backbone of numerous manufacturing processes across the country.
Industry bodies and market participants have warned that the reinstatement of duties could put upward pressure on input costs for domestic manufacturers, potentially impacting the competitiveness of sectors reliant on these chemicals. For instance, methanol and MEG are foundational materials for the production of resins and polyesters, while PTA and polyols are widely used in textiles and foams.
Drivers behind the policy shift
The original waiver was intended as a stopgap during a period when Indian refiners and petrochemical companies were directed to prioritize liquefied petroleum gas (LPG) production to ensure energy security. This shift in focus created temporary shortages of certain petrochemical feedstocks domestically, necessitating increased imports.
According to a Ministry of Finance statement issued on 30 June, the exemption aimed to guarantee steady supplies of essential chemicals at a time when the domestic market faced acute shortages and international shipping lanes were under threat. The ministry cited the normalization of supply conditions following diplomatic breakthroughs, notably the US-Iran agreement to reopen the Strait of Hormuz, as a rationale for phasing out the exemption.
Renewed risks as regional tensions flare
While the initial relaxation of import duties coincided with easing tensions and improved shipping access in the Gulf region, analysts note that recent weeks have seen a resurgence of conflict. Market sources report renewed strikes and instability in strategic corridors such as Fujairah in the UAE and the Red Sea, contributing to a fresh round of oil price volatility and concerns over supply continuity.
This uncertain outlook has prompted some industry stakeholders to question the timing of restoring duties. As the global petrochemical supply chain remains susceptible to geopolitical shocks, Indian manufacturers may face persistent challenges in securing stable, affordable raw materials.
Industry response and forward view
Indian chemical industry associations and downstream manufacturers are now urging the government to adopt a flexible approach, particularly if supply disruptions intensify or international prices surge further. Some have called for a mechanism to review duty structures dynamically in response to market conditions.
Experts suggest that the government may need to monitor the evolving situation in the Middle East closely and remain prepared to intervene if shortages reemerge or if domestic industries face unsustainable cost increases. As India’s manufacturing sector strives for higher global competitiveness under the Make in India initiative, access to affordable and reliable petrochemical inputs will be crucial.
For now, the reimposition of the 7.5 percent customs duty underscores the delicate balance policymakers must strike between revenue considerations, industry health, and supply security amid a turbulent global landscape.
Source from: https://chemicals.economictimes.indiatimes.com/news/industry-and-market/india-reimposes-customs-duties-on-key-petrochemicals-as-import-waiver-lapses/132452723
