India raises custom duty on naphtha, could hit imports

ICRA

01/02/2023 13:26

By Mohi Narayan
       NEW DELHI, Feb 1 (Reuters) - India has raised its import
tax on naphtha to 2.5% from 1%, budget documents showed on
Wednesday, in a move that could encourage companies to source
locally produced fuel instead of buying from overseas.
    Naphtha is used for making petrochemicals and consumer
goods, such as plastic and paints.
    "The increase in customs duty on naphtha would result in
some increase in feedstock cost for petrochemical manufacturers,
which would compress their margins," said Sabyasachi Majumdar,
senior vice president at Moody's India unit, ICRA Ltd.
    The change in the duty supports India's aim to reduce its
dependence on imports for key chemical feedstock and encourages
increased domestic production in the medium-to-long-term,
Majumdar added.  
    An increase in customs duty would potentially cut both
imports and exports of the fuel, said sources at two Indian
refiners, as importers turn to the local market for their needs,
reducing available supply for export.
    India has imported 1.3 million tonnes of naphtha from
April-December 2022, the first nine months of this fiscal year,
and exported about 4.4 million tonnes, according to the
government data.
    Indian companies such as Haldia Petrochemicals Ltd and
Reliance Industries Ltd  RELI.NS  import naphtha for producing
petrochemicals.
 (Editing by Nidhi Verma and Sharon Singleton)
 ((Mohi.Narayan@thomsonreuters.com; twitter.com/_mohi_;))