Proposed Duty Cuts To Hasten Its Advent THE reported proposal to reduce excise on polymers, plastics and other petrochemical products makes ample sense. The duty reduction on the cards would reduce costs, boost demand and, generally speaking, positively affect a host of downstream industries, including synthetic textiles. The proposal to remove duty on naphtha imports for use as feedstock in petrochem would be in order as well. In parallel, the news report that export duty on polymers is unlikely to be imposed is also notable. India is expected to emerge as a significant global hub for petrochem output and exports in the foreseeable future; an export duty would stymie cross-border sales in the region and beyond. What is also simultaneously required is further duty reduction in polymers, fibre intermediates and plastics, so as to reduce tariff barriers. It would actually rev up international competitiveness of domestic industry. Note that there is massive capacity expansion in the pipeline in polymers, pan-India. Reportedly, there is 40% capacity addition in the works, over the next three years. So a duty reduction now would be forward looking, pro-reform and discourage value-addition behind relatively high tariff barriers. A clear signal on duty reduction may also lead to rethinking on setting up relatively small greenfield polymer units, which in turn would avoid undue sprinkling of capacity and the attendant lack of scale economies. It would be for the greater good, in a fast-changing, high-growth industry. The expansion in polymer capacity by Reliance (Jamnagar), Haldia Petrochemicals, IOC (Paradip) and ONGC (Mangalore), among others, would likely boost output to 7 MT by 2011. Also, the upside can be huge on the strength of heightened demand. Besides, the petrochem industry worldwide is experiencing major changes, much of it revolving around feedstocks, geographies and sheer demographics. Producers in West Asia are stepping up using natural gas as feedstock, instead of dearer naphtha. Cheaper feedstocks can fundamentally improve petrochem economics. The reported new gas finds in the Krishna-Godavari basin and the real prospects for much improved gas availability ought to further improve prospects in petrochem.