Purified Terephthalic Acid

  • In the Budget 2020, the government announced abolition of anti-dumping duty on the import of Purified Terephthalic Acid (PTA) from seven countries, providing a huge relief to polyester industry.
  • It is to be noted that Mono Ethylene Glycol (MEG), another raw material used in the manufacturing of polyester, is currently the subject of another anti-dumping duty investigation initiated by Directorate General of Trade Remedies (DGTR) recently.

Objective

  • To make domestic market more competitive

Need for Abolition

  • PTA is a critical input for textile fibres and yarns, and its easy availability at competitive prices is desirable to unlock immense potential in the textile sector, which is a significant employment generator in the country.
  • PTA attracts anti-dumping duty ranging between $27 and $160 per tonne, depending upon the country of origin and the country often faces shortage of PTA that curtail the capacity utilization of the polyester segment industry.

Reasons for Imposing Anti-Duty

  • The anti-dumping duty on PTA was imposed after two domestic manufacturers, MCC PTA India Corp Pvt Ltd and Reliance Industries Ltd, approached the DGTR in October 2013.
  • The companies, which submitted that they accounted for over 50% of the domestic PTA industry, had argued that some countries had been exporting the product to India at prices lower than its value in their own domestic markets.
  • In its final findings, the DGTR,found that Purified Terephthalic Acid has been exported to India from China, Iran, Indonesia, Malaysia and Taiwan below its normal value which has resulted in dumping.
  • Following an investigation, DGAD imposed anti-dumping duties on PTA imported from South Korea and Thailand in 2014 and 2015, and from China, Indonesia, Taiwan, Iran and Malaysia in 2015 and 2016.

Dumping

  • Dumping is a process where a company exports a product at a price lower than the price it normally charges in its own home market.
  • This is an unfair trade practice which can have a distortive effect on international trade. 

Parameters to Access Dumping

  • There are two fundamental parameters used for determination of dumping- the normal value and the export price.
  • Both these elements have to be compared at the same level of trade, generally at ex-factory level, for assessment of dumping.

Anti-Dumping Duty

  • An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value.
  • Thus, the purpose of anti-dumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade.
  • The first Indian Anti-dumping legislation came into existence in 1985 when the Customs Tariff (Identification, Assessment and Collection of duty or Additional duty on Dumped Articles and for Determination of Injury) Rules, 1985 were notified.
  • Anti-dumping and anti-subsidies & countervailing measures in India are administered by the Directorate General of Anti-dumping and Allied Duties (DGAD) functioning in the Dept. of Commerce in the Ministry of Commerce and Industry.
  • While DGAD recommends the duty, the Finance Ministry imposes it.

Controversy over Imposition of Anti-Duty

  • Against Government’s Vision: Companies using PTA to manufacture polyester products claimed that the move went against the government’s vision of making the textiles sector a globally competitive industry.
  • Cost Ineffective: The companies had alleged that the product’s cost had become more expensive domestically, which made their own products pricier and less attractive for their domestic and international buyers. This had led to a drop in exports of some of these products during 2014-16, and an increase in imports of the products they had been producing, as there was no safeguard against imports of cheaper versions of these downstream polyester-based products.
  • Unable to Cater Domestic Demand: The domestic industry had argued that domestic PTA producers had not only been unable to ramp up capacity to cater to demand for the product, shutdowns of their manufacturing facilities once a year for maintenance purposes had also led to shortages of the raw material. PTA users claim that they had not been manufacturing as much polyester as they were capable of, operating at 70% of their capacity at any given time.

Impact

Enhance Global Competitiveness

  • The removal of the anti-dumpting duty would greatly help the country to enhance the global competitiveness, boost exports and also enable the domestic manufacturers to compete with the cheaper imports.

Boost to Domestic Users

  • It will help attract imports from China and South-East Asia and might create competition in the market. This would be a boost for PTA users and the entire man-made fibre textiles and clothing segment.
  • It could open up the manmade fibre value chain, benefiting technical textiles, home furnishing, the sportswear industry, sarees and dress materials.

Setting Standard Price

  • Abolition of anti-dumping duty will bring polyester price in India on a par with international price, which is considered the future engine of growth for the Indian textile industry.

Purified Terephthalic Acid (PTA)

  • PTA is a very important raw material as is it a precursor to mostly vastly used plastics polyethylene terephthalate (PET), poly butyl terephthalate (PBT), polyester fibers and is produced by oxidizing paraxylene.
  • It is a crucial raw material used to make various products, including polyester staple fibre and spun yarn. Some sportswear, swimsuits, dresses, trousers, curtains, sofa covers, jackets, car seat covers and bed sheets have a certain proportion of polyester in them.

Properties

  • Excellent weathering
  • Resistance towards chemicals & stains
  • Hard & Flexible
  • Good glass transition temperature range
  • Efficient powder flow & fluidizing characteristics

Source : Civil Services Chronicle Online, February, 2020