By: Pravin Prashant
Last updated : February 03, 2022 12:42 pm
The proposal to reduce customs duties on certain key chemicals, including methanol and acetic acid will be a huge relief for the sector
The Union Budget 2022-23 proposes to reduce the customs duty on certain critical chemicals namely, methanol, acetic acid and heavy feedstocks for petroleum refining. It also proposes to increase the duty on sodium cyanide for which adequate domestic capacity exists. The Budget also announced incorporating several concessional rates in the Customs Tariff Schedule instead of prescribing them through multiple notifications. “This review would simplify customs rate and tariff structure particularly in sectors such as chemicals, textiles and metals, and minimise disputes,” the Budget proposes. Indian Chemical News (ICN) presents industry’s reaction on Union Budget 2022-23.
Sabyasachi Majumdar, Senior VP & Group Head - Corporate Ratings, ICRA
"Duty reduction on key feedstocks like Acetic acid and Methanol is likely to boost the profitability of manufacturers dependent on imports however it is a negative for domestic manufacturers of these products. Further, several exemptions are proposed to be gradually phased out and a graded duty structure is likely to be followed. This will encourage intermediate product manufacturing for several sectors including chemicals and thus is likely to be favourable for the domestic chemical sector."
"GoI’s announcements of promotion of drone-based intervention in pesticide spraying, digitisation of land records and crop assessment are steps towards mechanisation of farms and improvement in productivity. In light of significant increase in the subsidy requirement during the year, Government of India has allocated additional around Rs. 605.6 billion to meet the subsidy outgo during FY2022 (RE). The budgetary allocation for the subsidy for the fertiliser sector for FY 2022-23 is around Rs. 1,052.1 billion which as per ICRA estimates inadequate to meet the sector’s requirement for the year.”
Maulik Mehta, CEO & Executive Director, Deepak Nitrite and Vice Chairman CII Central Gujrat Zone
“The Union Budget resists the urge to be populist and goes a long way into making Atmanirbhar Bharat an achievable goal. With recommendations in place to pursue high quality growth by proposing investment into infrastructure, simplifying rules around taxation and capital gains, support for MSME, Gati Shakti and Vande Bharat, the India it envisages is a confident, forward-looking nation.
The budget also focuses on a calibrated approach to ESG, ensuring that we prioritise large scale capacity to manage the energy transition with solar, hydrogen and 5G infrastructure investments- policies that are aligned with promoting opportunity rather than handouts.
The Chemical and Petrochemicals sector is a key component in the nation’s economic development. Reducing customs duty on methanol, acetic acid and heavy feedstocks for petroleum refining, is a commendable measure to boost Make in India. As India transitions towards a clean economy, the Government’s decision to mull viability of conversion of coal into chemicals, is a progressive step towards broadening the scope of the Chemical industry & making it integral to circular economy.”
S. Sunil Kumar, President, Henkel India
"We, at Henkel India, feel that the current budget has been very positive and focused on inclusive growth keeping today and tomorrow in perspective. The budget aligns very well with Henkel’s key values of sustainability & digitalization, taking positive steps and providing strong support to help propagate the India growth journey and achieve a US $5 Trillion economy. The strong investments on Infrastructure, initiatives on Asset Monetization and PLI Expansions have provided a much needed boost to the economy. The government has balanced this budget focusing on growth and social welfare programs. The focus towards ease of doing business, circular economy, agriculture, skilling initiatives in education and Unified logistics Interface Platform will set the economy on a firmer growth footing. Overall, our view is the budget is progressive and very well balanced."
Sanjiv Lal, MD and CEO, Rallis India
“Firstly, I must compliment the government for the pro-agriculture budget. The Government took important steps to boost the agricultural sector and it clearly reflects in the budget proposals. The involvement of Kisan drones for crop assessment, land records, and spraying of insecticides will not just drive the use of technology in the agriculture sector but also open up a spectrum of new development opportunities for farmers.
The digital delivery of hi-tech services to farmers using the PPP mode, with the involvement of public sector research, institutions, and other stakeholders of the agriculture value chains, is a key reform needed to keep up with the new era of digitisation.
The budget has been well thought through aiming to reduce the country’s dependence on imports of oilseeds through a comprehensive scheme to increase domestic production. In addition to this, the exemption is also being rationalized on tools for the agri-sector which are manufactured in India. Lastly, the announcement of the fiscal year 2022-23 being the International Year of Millets bring a new ray of light for the farmers.”
Maulik Patel, CMD, Meghmani Finechem
“Manufacturing and chemical sectors have been at the forefront of 'Make in India’ initiative in the past two years when there was high volatility and uncertainty due to the COVID-19 pandemic and anti-China sentiments. We are quite happy with the Union Budget 2022, as it culls out quite a few strong highlights, especially for the manufacturing and chemicals sector, that will further drive the country's economic growth. The manufacturing and specialty chemicals sectors form the building blocks of many industries. Therefore, the government’s proposal to reduce customs duties on certain key chemicals, including methanol, will be a huge relief for the sector."
R. S. Jalan, MD, GHCL
"The Budget 2022-23 centers on various measures to boost tech-enabled development, digital economy, climate action and energy transition. An Inclusive approach towards development to foster growth and economic recovery based on public investment and Capex is highly encouraging. The focus on housing, rural development and urban planning, Capex and increased investments in solar energy signal good growth prospects for the Soda ash industry as well. Overall, it is a forward looking budget that augments greater opportunities for India Inc. and reflects the sentiments of an Aatmanirbhar Bharat."
Rahul Tikoo, MD, India Sub Continent, Huntsman International (India)
"Today’s macro budget announced by Union Finance Minister Nirmala Sitharaman is progressive in nature with technology enablers across key contributory sectors. Overall, the blueprint to India @100 gives a fillip to an upward growth aspiration of this nation. A capital expenditure allocation of a massive Rs. 7.5 lakh crore towards digitization of the economy is a clear message to the world that New India’ inclusive and differentiated growth will lead to creation of opportunities for millions of youths, women and farmers. It also seeks a smooth transition in the country’s energy needs and commitments on climate change.
"The announcement of PM GatiShakti program for digital multimodal connectivity will aid in creation of an agile supply chain and reduced travel time for movement of goods. This initiative along with high focus on infrastructure will help in making India competitive. One station one product concept is well thought and has a potential to be popularised to support local businesses and supply chains. Smart Infrastructure spending creates a multiplier effect on the long term sustainable economic growth.
“Removal of exemptions on customs levy on certain chemicals and textiles that can be manufactured in India and provision of concessional duties on raw material that are used in manufacturing of intermediate products will boost the objective of Make in India and Atmanirbhar Bharat.”
Anil Gupta, Managing Director, Krishna Antioxidants
The Budget for FY 2022-23 announced by Finance Minister, Nirmala Sitharaman, certainly provides a significant boost to MSMEs and incentives for new manufacturing capabilities which are expected to propel growth and job creation for the sector. The increase in allocation for renewable energy would also provide a significant boost to the fiscal capacity of states and the increase in allocation for investment in the expansion of roadways and logistics networks is also a very positive step. Additionally, the extension of the ECLGS scheme is a welcome move for the MSME sector. Finance Minister Sitaram also stated, ‘Customs duty on certain critical chemicals are being reduced, while duty is being raised on some chemicals for which adequate domestic capacity exists,’ the changes in customs duty might enhance the value addition of local businesses. India is one of the largest chemical producers in the world and such initiatives by the government will aid consistent growth in the sector. Rationalisation & simplification of tax especially GST was expected however, we expect the same to be addressed separately.
Vimal Alawadhi, MD, Best Agrolife
"We welcome the growth-oriented Budget where the government focused on the overall development of the economy. The government’s intent to improve the agriculture sector was visible in the Budget announcements though we expected various measures for the Indian agrochemical industry, there was no announcement regarding the industry's growth.
"Similarly, the farm sector was also eagerly waiting for the reforms to reduce the cost of farm inputs and modern technologies required for increasing the farmer’s income and pushing up the agriculture sector’s growth beyond 3.9%. In line with the government’s focus on modern-day agriculture, we will continue educating the farmers about the judicious use of safe agrochemicals.
Shohab Rais, COO, Indian Chemical Business, Tata Chemicals
“The government this year is very clear on its move towards enabling energy transition through provisions for boosting domestic manufacturing of solar power equipment and batteries, in line with India's larger global commitment of tackling climate change. The government’s major allocation is towards focusing on the growth of grid-connected energy storage and supporting incentives for green bonds. The budget is very well thought through in terms of enhancing domestic value addition by reducing customs duty on certain critical chemicals namely methanol, acetic acid, and heavy feedstocks for petroleum refining, while duty is being raised on sodium cyanide for which adequate domestic capacity exists. Also, PM Gatishakti and specifically, focus on waterways, ports, roads, and railways, coupled with the proposed unified logistics’ interface platform will help improve supply chain efficiency and reduce logistics’ costs across sectors.”
K. Natarajan, ED & COO, Galaxy Surfactants
"The Finance Minister’s commentary around sustainable development as a responsible way of conducting businesses is heartening and calls for stakeholders to embrace it in totality. Furthermore, the acknowledgment of cleantech as a powerful tool to turn around green environment considerations is also noteworthy. The prominent focus on circular economy and carbon neutrality is highly welcoming, as we are marching ahead towards meeting sustainability development goals.
"The initiative to phase out more than 350 custom exemptions entries in different sectors including that of chemicals is encouraging. The simplification of the tariff structure in this regard is highly welcoming, considering the significance of custom reforms in ensuring the Ease of Doing Business."
Neeraj Jain, CFO, Cosmo Films
“We welcome the comprehensive budget announced by the Finance Minister to support the Indian economy. The Union Budget 2022 comes with a promise for the overall growth and revival of the economy. This year’s budget demonstrates the commitment by the government to strengthen infrastructure and employment creation. An increase in Capex expenditure to Rs. 7.5 lakh crore from Rs. 5.54 lakh crore will boost economic growth and is very positive. Target fiscal deficit for FY 22-23 at 6.4% of GDP is also aligned with the larger goal of economic growth without much impacting the financials. We are also eagerly looking forward to new legislation on SEZ units to simplify the SEZ operations."
Navroz Mahudawala, Managing Director, Candle Partners
“There are limited direct benefits for the chemical industry; which was on expected lines. However, there could be select intangible benefits going forward as the domestic growth of the industry has been substantially lagging behind the export growth & some of the measures would help.
"Several infrastructure spending initiatives (national highway expansion by 25000 kms) and the incremental capex spending; besides the boost given to low-cost housing should aid specific pockets of speciality chemical sectors. Construction chemicals & allied areas of coatings, adhesives and sealants should do better this year; recent financial results of Pidilite and even the larger coatings companies has not been very encouraging and demand has been muted in these areas. In parallel we expect the coatings industry to do better which would in turn aid several chemicals companies which supply to the coatings industry (solvents, pigments, surfactants).
“The one direct measure announced has been the cut in the customs duty of Methanol and this should aid several downstream intermediate companies in coatings, pharma, acetic acid as methanol is a key raw material for several downstream sectors.
"The chemical Industry historically has grown at 1.25 - 1.5 (x) the overall GDP growth rate for that year. With the current year GDP forecasted to grow for this year at 9%; we can expect a 12-14% growth for the larger players. However, considering this sector has been delivering very well on the export potential and can be a key export sector; it has been disappointing that no specific exports boost announcement has come in this budget.
Prashant Vasisht, VP and Co-Head, Corporate Ratings, ICRA
“The provision of fuel subsidy for sensitive petroleum products is around Rs. 40 billion for FY2023 (BE) (only DBTL on LPG sales) may be inadequate in case international prices of crude oil continue to rise and there is resistance from consumers to further price hikes. Additionally, additional excise duty of Rs. 2 per liter on unblended fuel with effect from October 1, 2022 would accelerate consumption of blended fuel.”