PURIFIED TEREPHTHALIC ACID (PTA)

PURIFIED TEREPHTHALIC ACID (PTA)

Context: As part of her Budget Speech, FM Nirmala Sitharaman said that the government was abolishing an anti-dumping duty that was levied on imports of a chemical called Purified Terephthalic Acid (PTA) in “public interest”. 

Terephthalic Acid; INDIATHINKERS IAS

What is an Anti-Dumping Duty? It is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value Dumping is basically a process where a company exports a product at a price lower than the price it normally charges in its own home market. For the sake of protection, many countries impose stiff duties on products they believe are being dumped in their national market, undercutting local businesses and markets. What is Purified Terephthalic Acid (PTA)? Purified Terephthalic Acid (PTA) is a critical raw material which is used to make various products, including polyester fabrics.  It makes up for around 70-80% of a polyester product and is, therefore, very important to those involved in the manufacture of man-made fabrics or their components. This includes products like polyester staple fibre and spun yarnCushions and sofas may have polyester staple fibre fillings. Some sportswear, swimsuits, dresses, trousers, curtains, sofa covers, jackets, car seat covers and bed sheets have a certain proportion of polyester in them. Why such a decision taken by the Government? There has been persistent demand that they should be allowed to source that particular product at an affordable rate, even if it means importing it. Further, the easy availability of this “critical input” at competitive prices was desirable to unlock “immense” potential in the textile sector, seen as a “significant” employment generator. The duty had meant importers were paying an extra $27-$160 for every 1,000 kg of PTA that they wanted to import from countries like ChinaTaiwanMalaysiaIndonesiaIranKorea and Thailand. Hence, removing the duty will allow PTA users to source from international markets and may make it as much as $30 per 1,000 kg cheaper than now. Why this anti-dumping duty has been place in first place? The anti-dumping duty on PTA was imposed following the move of two domestic manufacturers, MCC PTA India Corp Pvt Ltd and Reliance Industries Ltd, who approached the Directorate General of Trade Remedies (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. This dumping of PTA into the Indian market had a “significant” adverse impact on the domestic industry. Following an investigation, DGTR 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. Why this move is under controversy? Companies that use PTA to manufacture polyester products has claimed that the move went against the government’s vision of making the textiles sector a globally competitive industry as the move has left them with limited domestic suppliers of PTA 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 which 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 mechanism against the imports of cheaper versions of these downstream polyester-based products. Further, 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. Is it the only product under such a duty? This is not the only product which has been included in anti-dumping duty framework. Apart from this, Mono Ethylene Glycol (MEG), another raw material which is being used in the manufacturing of polyester, is currently the subject of another anti-dumping duty investigation which has been initiated by DGTR recently. This investigation was initiated after RIL, supported by another company (India Glycols Ltd) had argued that top MEG exporters like KuwaitSaudi ArabiaSingapore and the United Arab Emirates had been dumping the product and that the domestic industry was suffering “material” injury as a result.

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