On subsidy reduction

The government has pledged itself to doubling the food production during the next ten years. In keeping with the above objective, it shall be the endeavour of the government to provide fertilisers at an affordable price while keeping the subsidy within reasonable limits. The volume of subsidy is, however, dependent on the level of consumption which in turn is influenced by the farm gate prices of fertilisers. Simultaneously, efforts will also be made by streamlining theprocedures of the Fertiliser Industry Coordination Committee (FICC) and motivating the industry to take cost reduction measures.

On the drastic reduction in import duty on chemicals/ formulations

As a part of the macro-economic policy and also for its obligations under the multi-lateral treaties, the country has been rationalising import duties and in most cases, the duties have been coming down. Such reduction in import duties is not restricted only to the chemicals sector but has been applied across the board to all sectors of the economy. The Chemical Industry in broader sense of the term includes Inorganic, Organic chemicals, Drugs and Pharmaceuticals and Petrochemicals and the whole industry sector is in the process of adjusting itself to the challenges posed by globalisation and global competition including reduction in duties. While the industry is certain to face problems during the transition phase, it will help the Indian industry to become competitive and a part of the larger globalmarket driven economy.

It is a fact that over the last few years, the general rate of duties has been reduced. For example, the peak rate of customs duty on drugs and pharmaceuticals is now 30 per cent plus five per cent plus four per cent. It is also a common knowledge that lower customs duty would entail more imports and hence more competition. Such competition has affected the profitability of units in the pharmaceutical sector. However, it is also a fact that the production in the pharmaceutical sector has gone up considerably. For example, production of bulk drugs, which were of the value of Rs 1,150 crore in 1992-93, increased to Rs 2,623 crore by 1997-93. The production of pharmaceutical formulations has gone up from the level of Rs 6,000 crore of 1992-93 to Rs 12,068 crore by 1997-98. The Drug Policy, which is administered by the Ministry of Chemicals & Fertilisers, has an inbuilt tariff mechanism for the protection of the indigenous drug industry. It could be said that the rate of import duty ondrug industry probably needs to be kept at the peak binding rate that is permitted under the WTO arrangements. The duty structure is reviewed every year by the Government and corrective action, where necessary, is always taken.

For the Petrochemical Sector, reduction in the import duty in general has resulted in availability of raw materials and intermediates at a competitive price to the domestic petrochemicals particularly the processing units. With the reduced import duties and better availability of raw materials and intermediates the domestic prices of petrochemicals have come down. This scenario has in a way helped the indigenous industry in increasing the productivity and efficiency. The domestic industry has now been striving for higher level of efficiency to meet both domestic and global competition. It is evident that some of the units operating on technologies which could be said to be now out-dated and those units would have to go for upgradation of the technology and also the scale ofoperations to meet the increasing competition.

On protection of the domestic industry

The process of integration of Indian economy with the global economy would probably have to go at a pace determined basically by necessity to control an aberration. Both the Union and the State Governments have now been giving more focussed attention to the need for improvement in the infrastructure. The Government has put in place as you are aware under the Ministry of Commerce, a mechanism for protecting the indigenous industry from unfair competition from outside. The anti-dumping cell is specifically set up for this purpose. The restructuring of the Customs & Excise duties to take care of the anomalies is an exercise taken up annually by the Government and at times even in the midst of the fiscal year.

For drugs and pharmaceuticals. I have already said that the need probably would be to keep the peak binding rate of duty permissible under the WTO arrangements for protection to the indigenousindustry.

On price reduction in chemicals industry

Prices are influenced by a variety of factors.The availability of cheaper raw materials due to reduction in customs duty has contributed to reduction in the prices of the finished products in general. For example, the prices of Phenol, an industrial chemical, were in the range of Rs 36,500 per tonne and Acetone about Rs 26,000 per tonne in 1992-93, the prices reported in September, 1998 of Phenol and Acetone were in the range of Rs 34,000 per tonne and Rs 23,380 per tonne respectively.For the drugs and pharmaceuticals sector, the Government has, through the successive Drug Policies and the Drug (Price Control) Orders, have been keeping a check on the prices. Even for those drugs which are now not under price control, the Government monitors the price from time to time and in case of any indication of very high prices being charged, the Government intervenes and fixes the prices of such drugs. For this particular sector, it can be said that thewholesale price index of drugs and pharmaceuticals compares to the index for all other commodities. For the petrochemical segment, the domestic as well as international prices have been declining over the last two to three years. The reported prices of PTA was Rs 28,500 per tonne in July 1996 and in October 1998, the price was Rs 22,500 per tonne. The prices of LDPE were reported to be Rs 58,000 per tonne in July 1996 (inclusive of Excise Duty). As against this, the LDPE price in October 1998 were in the range of Rs 46,300 per tonne. For Polypropylene, the prices including Excise Duty in July 1996 were reported as Rs 52,000 per tonne. In October 1998, the Polypropylene prices are reported as Rs 42,500 per tonne. It is clear that there is a reduction in prices in all the three sub-sectors, namely, Chemicals, Pharmaceuticals and Petrochemicals.

On steps to prevent dumping

As already said earlier, the Government has set up a mechanism for imposition of Anti-dumping duty to safeguard and protect theinterests of indigenous industry. Anti-dumping duties have been imposed in certain cases viz. Calcium Carbide, Carbon Black, Acetylene Black, Bisphenol A, etc. The machinery in anti-dumping is under the Ministry of Commerce. While this Department does not normally monitor cases of dumping of drugs and pharmaceuticals or chemicals and petrochemicals, the Department has been advising and guiding the aggrieved parties to file the necessary complaints with full data and documentation with the competent authority in the Ministry of Commerce so that it would be possible for the Government to take such action as permissible under the law.