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Trade pacts spook chemical firms

Mumbai, Dec. 7: The domestic chemical industry has raised an alarm over the Centre’s move to forge bilateral free trade agreements with Asean countries like Singapore.

Local players said implementation of such agreements could have an adverse impact as it would lead to a plethora of cheap imports from that country.

Industry analysts said the government of Singapore, with whom negotiations are on, is asking for nearly 2,400 items from the chemical sector to be covered under the free trade agreement. There are apprehensions that an implementation of the agreement would give way to duty-free imports, thus hitting the industry hard. These concerns were voiced at a meeting of the task force on investment promotion and co-ordination constituted by the government.

The task force, under the chairmanship of economic adviser to the Prime Minister S. Narayan, includes secretary (financial sector) . S. Sisodia, Indian Banks Association chairman V. Leeladhar, and additional secretary (financial sector) Vinod Rai. It has been set up to identify measures for growth of investment for traditional manufacturing sectors.

Domestic manufacturers have said only those products that are beneficial for both the countries should be allowed under the agreement. “Not following this route will be yet another blow for the industry which is already reeling under cut-throat competition and competitive imports,” a source said.

The domestic chemical industry stands at $28 billion and is the third largest in Asia and twelfth largest in the world.

However, the sector is lamenting that non-synchronized reforms have been followed leading to huge imports. This has resulted in import duties on feedstock standing at 15 per cent, while the existing peak duty of 25 per cent on chemicals and polymers is below the World Trade Organisation bound rate of 40 per cent, sources added. It is now expected that the forthcoming Union budget would reduce duties on feedstock to 0-5 per cent.

Sources said due to the liberalised import duty structure, the country is an easy prey for dumping. “India has now become one of the most frequent users of the anti-dumping provisions and the chemical sector now tops the list accounting for around 80 per cent of the cases,” a source said.

Unlike the industry structure in many overseas countries, in India, the sector is characterised by small plant capacities and a wide dispersion.

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