The Indian soda ash industry is surprised that the Finance Minister has singled out soda ash among chemicals for harsh treatment. The Budget has reduced the import duties for soda ash from 35% to 20%….
The Indian soda ash industry is surprised that the Finance Minister has singled out soda ash among chemicals for harsh treatment. The Budget has reduced the import duties for soda ash from 35% to 20%. In addition, the surcharge of 10% has also been removed. This could mean a serious blow to the domestic industry, which is already facing an oversupply situation. The steep reduction in the import duty rates has to be seen in the light of the representation (read threat) made by the US Government on behalf of ANSAC (American Natural Soda Ash Corporation), which is a consortium of major US soda ash manufacturers. The US Government has said that it would consider linking the benefits enjoyed by Indian exports under the Generalised System of Preferences to allow export of soda ash by ANSAC. Indian exports through the GSP scheme is now worth US$ 400 million. The representation is aimed at forcing the MRTP to revoke the ban imposed on the import of soda ash through ANSAC. The demand for soda ash is expected to go up by 8% in fiscal 2001, thanks to improved demand from the detergent industry. The domestic price of soda ash which declined drastically in the first half of the year recovered by around 30% in the second half. Thus, the average price realisation is expected to be marginally lower than the previous year. In this scenario, the reduction in import duties could adversely impact the margins of companies such as Tata Chemicals, Nirma and Gujarat Heavy Chemicals. As of now the domestic prices of soda ash (around Rs 8,000 per tonne) is close to the import price of around Rs 7,900 per tonne. The reduction in the import duties, which could mean a decline in the import price is expected to apply pressure on domestic prices and the profitability of the companies.