The basic import duty on the key synthetic textile raw material PTA/DMT/MEG has been reduced from 30 per cent to 25 per cent. Though there is a surcharge of 10 per cent on imports, earlier the products enjoyed a special import duty of 5 per cent. It may be recalled that manufacturers of these intermediates had asked for a hike in duty in spite of an anti-dumping duty.

Worse is the impact of the hike in import duty on the key raw material for the petrochemicals sector -- naphtha -- which has risen from nil to 5 per cent. Excise on the product too, has increased marginally from 15 per cent to 16per cent. This hike will have a domino effect on the pricing of all petrochemical products. However, companies using LNG as feedstock are likely to benefit as import duty on LNG has been reduced from 12 per cent to 5 per cent. IPCL has two of its crackers using gas as their feedstock, while one is using naphtha. Reliance and Nocil primary use the liquid as feedstock.

Increase in import duty on kerosene from nil to 5 per cent is also likely to affect LAB manufacturers. Methanol manufacturers, who had been severely hit by huge imports of the commodity, are likely to be further affected with the reduction in customs duty from 30 per cent to 25 per cent.

This is likely to bring down the price of the methanol, which will, however, benefit DMT producers like Bombay Dyeing which uses it as a raw material. The polymer sector has been fortunate not to see a drop in its import duty.

An across-the-board effect will be the hike in input costs as a result of the 4 per cent increase in railway freight as well asthe Re 1 hike in diesel prices. Another factor that is likely to affect the sector is the increase in levy on capital goods for setting up new projects. With prices of the petrochemicals showing no signs of improvement, margins of producers will be affected further. To top it all, the companies will have to give a surcharge on the profits (if at all) they generate.