India issues tariff threat

The Indian government is considering a new round of import duties targeting Gulf producers that receive "unfair" subsidies, an industry trade group warned yesterday. India has drawn attention to the low output costs of Saudi producers of polypropylene, a common plastic, and its warning could re-open the controversy over the Saudi government's role in its petrochemical industry. The Gulf Petrochemicals and Chemicals Association (GPCA) called the Indian government's objections "baseless", and said new Indian import tariffs would violate World Trade Organisation (WTO) rules.

"This decision is not justified because GCC companies are neither dumping products in India nor causing injury to the Indian petrochemical industry," the group said. "For obvious commercial reasons, including proximity to the source and low local production and distribution costs, the price of feedstock in Saudi Arabia, as in the Gulf region generally, is more competitive than in countries like India that do not have the same endowment of natural resources."

The development comes a year after the Indian government levied tariffs on polypropylene imports from Saudi Arabia and Oman. The tariffs, which expired in January, were based on a complaint that Gulf producers were exporting below cost, or "dumping" polypropylene on the Indian market. In a report last month, India's ministry of commerce and industry changed tack, and said Saudi producers were benefiting from subsidies rather than exporting below production costs.

The ministry's report said the low Saudi domestic price for propane, a high-value fuel produced at refineries and gas plants, created an "unfair advantage" for Saudi chemical companies. The advantage was "entirely on account of the Saudi government intervention of maintaining dual prices for domestic consumption and exports", according to the Indian government's report. A spokesman for the ministry could not be reached for comment yesterday.