INDIA BUSINESS WORLD - JANUARY 1^st - JANUARY 15^th - 2008

DUTY ON PLASTICS MAY BE HALVED

The government is considering a proposal to slash the 16% excise duty - the tax on production levied at the factory gate - on plastics by half to drive consumption of plastics in agriculture, packaging, irrigation, geotextiles, healthcare, lifestyle, automobiles and infrastructure.

The move is expected to spur price reduction in polymers used in a range of industries from auto accessories to medical devices. This would achieve the twin objective of fighting inflation as well as increasing the per-capita consumption of plastics outlined in the new petrochemicals policy. The idea is to drive up demand for the Rs 55,000-crore plastics processing industry, which employs 33 lakh people.

The finance ministry is considering the chemicals and fertiliser ministry's recommendation, but the decision could be influenced by revenue c o n s i d e r a - tions, an official said. The government gets Rs 7,300-crore revenue from the plastics processing industry, the source said. Exporters get refund of various levies they pay for the $1.9-billion turnover.

While naphtha attracts nil duty for making polyethelene and polypropylene, the government is considering slashing the 5% Customs duty on the chemical for producing materials other than the two polymers. Producers find exports more lucrative. The intention is to boost the plastics processing industry that has 22,000 units and 15 raw material producers.

China has successfully created a world-class plastics processing industry. It controls half the global footwear market and a little less than threefourths of the global toys market. The neighbour exports 7.5 million tonnes of processed plastic every year.

The government wants the percapita consumption of plastics to increase from the present 4.5 kg, which compares poorly with the world average of 25 kg and China's 30 kg.