India Cuts Chemical Duties Amid Crisis, But Supply Woes Persist
India's government has removed an 8.25% customs duty on essential chemicals and petrochemicals until June 30 to aid MSMEs affected by the global energy crisis. While reducing costs, this measure faces challenges due to ongoing supply chain disruptions in the Strait of Hormuz, causing shortages. India's significant reliance on Middle Eastern imports (55.1%) makes its chemical supply vulnerable, potentially hindering full relief despite the duty cuts for struggling sectors like plastics and ceramics.
Amid an escalating energy crisis exacerbated by the US-Israel-Iran War, the Indian government has temporarily eliminated an 8.25% customs duty on a range of crucial chemicals and petrochemicals. Effective from April 2 to June 30, this initiative targets key imports such as methanol, acetic acid, VCM, PTA, MEG, phenol, styrene, and major plastics like polyethene, polypropylene, PVC, and ABS. The primary objective is to alleviate financial strain on India's Micro, Small, and Medium Enterprises (MSMEs), which have been severely impacted by production cuts, revenue losses, and job risks. Sectors like Morbi's ceramic industry and the plastic sector, facing steep raw material price increases and significant production declines, stand to benefit from reduced import costs.However, the article highlights that while duty reduction addresses cost concerns, the more formidable challenge remains supply chain stability. Restrictions in the Strait of Hormuz, a critical global trade route, are causing significant shipping delays and creating persistent shortages, undermining the full potential of the duty cuts. Data from 2023–24 reveals India's profound dependence on the Middle East for 55.1% of its chemical imports, with China contributing another 33.9%. This heavy reliance on a single volatile region renders India's chemical supply chain highly susceptible to geopolitical disruptions. Major suppliers include Oman, China, Saudi Arabia, and Iran, underscoring the interconnectedness and fragility of global chemical trade. These chemicals are vital across diverse industries, from glass and textiles to fertilisers, electronics, medicines, and plastics, making a stable supply crucial for the national economy.
