India’s CPVC imports: A blessing for Indian traders and a disguise for primary producers

Faced with exorbitant anti-dumping duty (ADD) that makes cheap imports difficult, traders have discovered new ways to continue dumping chlorinated polyvinyl chloride (CPVC) resin and compound into the Indian markets, circumvent the applicable taxes, and avoid regulatory glare. The number of such imported consignments has increased in the last few months, causing severe injury to Indian primary producers and contrasting the government’s ‘Make in India’ campaign.

Three people engaged directly in the CPVC business, said, “Indian traders have been importing both resin and compound of the plastic raw material from the non-producing countries such as Singapore, and Hong Kong, and there has been an increased number of import consignments from Thailand in the last few months. India is a deficit country in terms of CPVC as its demand stands much higher than the production from local producers. Therefore, we are not against imports. However, its import is happening from Singapore and Hong Kong, which are not producers of CPVC. The origin of these consignments is either China or Korea on which the government of India has imposed ADD.”

Presently, the Indian government has levied ADD on the import of CPVC originating from China and Korea. Hence, its imports from Singapore, Hong Kong, and Thailand do not attract any ADD, and, Indian importers can procure CPVC resin and compound freely from these countries. Additionally, according to sources, Chinese suppliers are unable to export CPVC directly to Indian buyers at the prevailing market price because of the ADD levied by the local government. Therefore, Chinese producers substantially cut prices to increase sales to the rapidly growing Indian markets.

Anti-dumping duty on chlorinated polyvinyl chloride (CPVC) import in India
Any country of exports including	Producer	Product type	Amount ($/tonne)
China	Shandong Gaoxin Chemical Co Ltd	Resin	2,087
China	-	Compound	2,717
China	Shandong Pujie Rubber and Plastic Co Ltd	Resin	2,053
China	-	Compound	2,853
China	Shandong Xiangsheng New Maeterials Tecnology Co Ltd	Resin	2,045
China	Welfang Sundow Chemical Co Ltd	Resin	2,025
China	-	Compound	2,853
China	Shandong Xuye New Materials Co Ltd	Resin	2,057
China	-	Compound	2,657
China	Any producer other than mentioned above	Resin	2,161
China	-	Compound	2,853
China	Any	Resin	2,161
China and Korea	Any	Compound	2,853
Korea	Any producer	Resin	2,024

Source: Ministry of Finance, Government of India

“Thus, invoices generated by the Chinese or Korean exporters quote the ADD-driven prices which is substantially higher than the current prevailing prices in the exporting countries. Therefore, the price differential is compensated either by cash or adjusted in the bills of the products other than CPVC. Now, the production cost of its end products i.e. high quality pipes, being manufactured through imported CPVC, works out to be substantially lower than the raw materials used through procurement from domestic producers. So, this practice damages the selling of Indian CPVC resin and compound,” said a senior industry official.

CPVC is a thermoplastic moulded into many of the same products as PVC. Both are similar in many ways, but they shouldn’t be used interchangeably. Both are made of the same basic elements with one distinguishing factor. CPVC is altered by a free radical chlorination reaction that effectively increases the chlorine content of the material. This difference in makeup allows CPVC to withstand a wider range of temperatures, and therefore, it is used in hot and cold water transportation.

A phenomenal demand growth
India is a growing market for pipes. As a result, the CPVC pipe market is growing faster due to its heat-bearing capacity feature and increasing demand for quality products among consumers. CPVC resin is a major raw material used in manufacturing CPVC pipes. In line with the higher demand for CPVC pipes, the consumption of CPVC resin is also increasing. While India’s CPVC pipe demand is met domestically through Indian manufacturers, however, the raw material i.e. CPVC resin is primarily catered through imports.

India’s CPVC demand has increased substantially in the last few years, driven by consumers’ quest for higher-quality pipes in their daily lives. Additionally, the government’s focus on infrastructure development and significant spending through budgetary allocations have contributed to a massive increase in demand over the last few years. Industry estimates put India’s CPVC resin demand at 200,000 tonnes per annum (TPA) in the financial year 2022-23, with sustained growth in consumption expected in the future.

Against such massive demand, India’s production stands at around 40,000 TPA only. Consequently, India is import-dependent for around 82 percent of its annual consumption. The deficit is met through imports from various countries, including China, Taiwan, and the United States, making India the largest importer of CPVC in the world.

To increase its supply from domestic sources, India’s two primary producers such as Meghmani Finechem Ltd (MFL) and DCW Ltd, have announced plans to expand their CPVC production capacity and reduce the country’s reliance on imports. These primary producers also encourage domestic pipe producers to plan their business in advance based on domestic price movements.

In November 2022, Mumbai-headquartered DCW Ltd chalked out a Rs 125 crore capital expenditure plan, which entails doubling its CPVC resin capacity and debottlenecking synthetic pigment output at its Sahapuram Complex in Tamil Nadu. The company’s total CPVC resin production capacity, currently at 10,000 TPA, will increase to 20,000 TPA after the expansion. Additionally, the company has a 12,000 TPA compounding facility at the same location. The CPVC expansion project is set to be commissioned in the second half of the current financial year 2023-24.

In July of last year, MFL announced the commissioning of India’s largest CPVC manufacturing plant at Dahej in Gujarat, with a capacity of 30,000 TPA. In January of this year, the company announced an expansion of its CPVC manufacturing capacity by 1.5 times, reaching 75,000 TPA. Furthermore, the company plans to add another 45,000 TPA by the fourth quarter of 2023-24. MFL’s Chairman and Managing Director, Maulik Patel, stated that India’s dependence on imports would decline by 20-22 percent after the commissioning of the Dahej plant.

ADD levied to restrict import
The government of India, vide its notification issued in March 2020, imposed high ADD on imports of CPVC from China and Korea. According to the government notification, the ADD on CPVC resin and compound imports from China’s Shandong Gaoxin Chemical Co Ltd was levied at US$2,087 a tonne and US$2,717 a tonne respectively. The price differential duty on several other Chinese producers stood in the range between US$2,024 and US$2,853 a tonne. A similar duty was imposed on Korean CPVC producers as well.

While imposing the duty, the Ministry of Finance stated that the dumped imports of CPVC from China and Korea caused material retardation to the establishment of the domestic industry. The ministry, therefore, recommended the imposition of definitive anti-dumping duty equal to the lesser of the margin of the dumping and the margin of injury, in order to remove the injury to the domestic industry.

An anti-dumping duties are tax imposed on imported goods to compensate for the difference between their export value and the current prevailing market price, if dumping causes injury to producers of competing products in the importing country.

Conclusion
The current practice of CPCV imports through non-origin countries and compensation also encourages its dumping, which needs to be controlled through safeguard measures to promote ‘Make in India’ and ‘Aatmanirbhar Bharat’ (self-reliant India) and attract private investment further in this emerging sector.


DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com