Calcutta, March 23: Haldia Petrochemicals (HPL) may have to face tough competition from global majors such as Exxon Mobil and Shell following the re-imposition of import duty on naphtha.

To make matters worse, polymer import from Singapore will attract zero duty tariff in three years from now because of the comprehensive economic cooperation agreement with the island nation.

This will help Exxon and Shell enter the Indian market in a big way as both operate from Singapore’s Jurong Island — one of the largest chemical hubs of the world.

“It is a double whammy for HPL,” a company official, who did not wish to be named, said.

At present, there is a 5 per cent tariff on polymer import to India. It has already been reduced to 4.45 per cent in the case of Singapore and will be brought down progressively.

The import duty on the finished product is kept higher than the raw material to protect domestic industries.

For petrochemical firms, the tariff on naphtha, which is a raw material, was zero per cent, while that on polymer, which is a finished product, was 5 per cent.

The Budget 2007-08 brought the duty on naphtha and polymer on a par.

In the case of Singapore, the duty on the finished product is already less than that on the raw material.

While all domestic petrochemical companies will feel the heat of cheaper imports from Singapore, HPL will be affected the most because of its dependence on naphtha imports. Reliance produces its own naphtha, while GAIL (India) uses natural gas to make polymer.

“HPL will be in a disadvantageous position vis-à-vis other petrochemical companies to face the challenge from Singapore,” an observer said.

The import duty on polymer is lowest in India compared with Indonesia, Malaysia, Thailand and China, where the rates are 10, 25, 15 and 7.8 per cent, respectively.

The latest development may spell fresh trouble for HPL, which came out of a debt trap a few years ago to register a profit of Rs 580 crore last year.

The company has already estimated a lower profit of Rs 300-350 crore in 2007-08. The rising price of naphtha will affect its bottomline by Rs 290-300 crore next fiscal.

The HPL stock, which some valued at Rs 125-150 a share, also needs to be reworked after the market crash and the re-imposition of import duty on naphtha.

The Bengal government, which is the largest shareholder in HPL, has taken up the issue with the Centre at various levels — from Prime Minister Manmohan Singh to finance minister P. Chidambaram.

The silver lining is that the department of chemicals and petrochemicals has raised objection to the Cabinet’s decision to remove customs duty on 69 polymer, chemical and pesticide items as part of the agreement with Singapore.