India raises naphtha import tax to boost local sourcing

India has increased its tax on naphtha imports to 2.5pc from 1pc earlier with an aim to boost domestic sourcing of the petrochemical feedstock, budget documents the government released on 1 February show.

The increase reverses a naphtha import tax cut the government made in May 2022 in response to rising costs of raw materials, providing reprieve to the plastic manufacturing industry. A surge in crude prices past $100/bl then had exacerbated production costs at naphtha-dependent ethylene producers.

The new change in import duty came into effect from 2 February.

India imported 14.07mn bl (38,500 b/d) of naptha in 2022, up by 40pc from a year earlier, according to oil analytics firm Vortexa. The country had produced 433,000 b/d of naphtha last year, exceeding its consumption of 321,000 b/d, according to oil ministry data.

The majority of the naphtha imported into India is received at the eastern port of Vishakhapatnam, where state-controlled HPCL operates a 166,000 b/d refinery.

More economical alternatives in the international market sometimes make Indian buyers turn to imports to meet their feedstock needs.

The increase in naphtha import duties could prompt domestic petrochemical producers to source more of the feedstock from local refiners instead of relying on imports, an India-based naphtha trader said. Eventually, the decision to source naphtha locally will depend on how the economics play out, the trader added.

A move to buy more domestically produced naphtha, if it happens, could leave Indian refiners with even less of the product for export.

Exports have already slipped in recent months because of increased demand for naphtha in the gasoline blending pool. Strong domestic gasoline demand has led to increased gasoline blending activity at Indian refiners, leaving less naphtha available for export.

India’s naphtha exports hit a seasonal low in November last year, according to latest data from the Indian oil ministry’s Petroleum Planning and Analysis Cell (PPAC). Naphtha exports were at around 126,000 b/d in November last year, lower than the seasonal average of around 169,000 b/d across a five-year period from 2018-2022.

Naphtha exports inched up slightly in December to 127,000 b/d, but remained 31pc below the 184,000 b/d recorded a year earlier. Indian refiners exported 156,000 b/d of naphtha in the whole of 2022, a 15pc fall from 2021, Vortexa data show.

Source : For more Details

Leave a Reply

Your email address will not be published. Required fields are marked *