Raw material duty hike opposed in Bengal

The Small Scale Detergent and Soaps Manufacturer Association (SSDSMA), a nodal body with 50 companies as its member in West Bengal, has launched a strong protest against the proposed imposition of safeguard duty on import of linear alkyl benzene (LAB). The association claims the safeguard duty would result in an equivalent hike in the price of LAB which constitutes around 50-60 per cent of detergent.

Imposition of this duty will add Rs 800 crore to the profits of the four LAB manufacturers in the country, while hurting the detergent makers as prices would go up and sales and margins may be under pressure, alleged Arup Das, secretary, SSDSMA.

LAB is the basic raw material used for manufacture of household detergent products used by the common man for washing clothes. LAB comprises over 50-60 per cent of the raw material cost of detergent products.

LAB manufacturers in the country include Reliance Industries, Indian Oil Corporation, Tamil Nadu Petro Products, and Nirma.

Recently, the government discovered that increased imports of a key detergent ingredient are hurting these LAB manufacturers, and is examining whether safeguard duty should be imposed to protect the domestic industry. The demand is for a safeguard duty of 20 per cent for the first year, 15 per cent in the second and 10 per cent in the third year.

According to sources in the All India Federation of Detergent Manufacturers (AIFDM), the imposition of the duty would increase prices of LAB by 20 per cent. Raw material prices for detergents would shoot up by at least 12 per cent because LAB constitutes 50-60 per cent of detergents, and the prices of the final product would go up accordingly which will affect the end consumers.

“This would also effect the demand for detergents and may result in closure of many small scale and KVIC units manufacturing detergents in the country. Moreover, the four LAB manufacturers employ only 500 people as against 50,000 employed by the detergent industry. While a safeguard duty will support the LAB industry, it would badly hurt the small scale detergent industry as prices would go up and sales and margins may decline,” sources in AIFDM pointed out.

LAB imports have reportedly risen from 9,854 tonnes in 2004-05 to 45,505 tonnes in 2007-08. The share of imports in domestic consumption has increased from 3.82 per cent in 2004-05 to 14.05 per cent in 2007-08.

The four main players have said they are operating below their capacity, which led to the closure of units in November. The LAB producers are also being supported by the Indian Oil Corporation in seeking imposition of safeguard duty for three years on imports from Qatar, Switzerland, Saudi Arabia and Iran.

DGS Ranjit Kumar, joint commissioner, Customs, , had recently said his office has sought views from different parties by January 20, after which the government would decide whether there is a case for imposition of the duty.