Naik warns of import threat from Singapore

Vol 6, PW 25 (26 Feb 03) People & Policy

NAIK CLEARLY sees it as his mission to champion the cause of India's domestic refiners against the perceived onslaught of cheaper imports, particularly from Singapore.

His budget wish-list bears this imprint. Naik is clear why he favours greater tariff protection for domestic refiners.

According to the minister, Indian refiners - except Reliance - are putting in place or planning major investments in the modernisation or upgrade of crude oil import facilities and the production of lower polluting fuels. "These investments are necessary to make them globally competitive producers as far as costs and product quality are concerned." Until the loans for these investments are paid off, domestic refineries need tariff protection, which ensures gross margins higher than that of "globally competitive producers like Singapore refineries, which have already made investments and serviced their debts," stresses Naik.

This is not the only reason. Naik is also angry that domestic refiners incur a plethora of state taxes on their products while imported products are exempt.

This can "render a domestic oil refinery totally non-competitive or unviable." Naik has a useful number to back his case. He notes that "the yearly burden" of state taxes on Indian refineries is more than Rs3, 000cr ($625m) but that "compensation" from the finance ministry covers only half this amount.

"Until such time as a complete level playing field becomes available to domestic refiners against importers of petroleum products with regard to state taxes, the advantage (to domestic refiners) flowing from import tariffs should be judged together with the substantial disadvantage from state taxes."