32-Pakistan Trade Liberalization Sectoral Study On Chemical Sector

PAKISTAN INSTITUTE OF TRADE AND DEVELOPMENT
COMPARATIVE ANALYSIS OF PAKISTAN AND INDIA CHEMICAL INDUSTRY Sectoral Analysis for Pakistan-India Trade Normalization
Working Paper Series Draft Report
By: Sohail A. Paracha
August, 2012
Acknowledgment
I would like to express my gratitude to Dr. Adil Miankhel, Director Research for his cooperation, guidance; technical support and expertise help me all along writing this report. I would also like to thank my colleagues who have communicated their insights and contributed directly or indirectly to this paper. I also appreciate Mr. Badar ud Din Tanweer, Survey Coordinator for their support in compilation of data and report formatting.
Table of Contents 1. 2. 3. 4. a) Introduction ............................................................................................................................. 6 Classification of Chemical Industry: ....................................................................................... 9 Trend analysis of chemical Industry ...................................................................................... 12 Pakistan-India Bilateral trade of Chemical Industry ............................................................. 14 Pakistan Export to India: .................................................................................................... 14
b) Pakistan Imports from India.................................................................................................. 15 c) Pakistans Negative List of Chemicals for India: ................................................................. 16 d) Indias Sensitive List of Chemicals for Pakistan under SAFTA: ......................................... 17 4.1 Organic Chemicals (HS 29) ........................................................................................... 18
a) Pakistan Exports to India: ..................................................................................................... 18 b) Consumption & Production of Organic chemicals by Pakistan ........................................... 19 c) Pakistan Imports from India: ............................................................................................. 20
d) Indian Import Policy Conditions & Requirements for Organic Chemicals .......................... 21 4.2 Inorganic chemicals (HS-28) ......................................................................................... 22
a) Pakistans exports to India: ................................................................................................... 22 b) Consumption & Production of Inorganic Chemicals in Pakistan: ........................................ 23 c) Pakistan Imports of inorganic Chemicals from India: .......................................................... 25 d) Consumption & Production of inorganic Chemicals in India: ............................................. 26 e) Indian Import Policy Conditions & Requirements for Inorganic Chemicals ........................ 26 4.3 Fertilizers (HS-31).......................................................................................................... 28
a) Pakistan Imports from India .................................................................................................. 28 b) Consumption & Productionin Pakistan:................................................................................ 29 c) Indian policy/subsidy on fertilizers:................................................................................... 29
d) Indian Import Policy Conditions & Requirements for Fertilizers Chemicals....................... 30

3
4.4
Tanning or dyeing extracts (HS-32) ............................................................................... 30
a) Pakistan export to India ......................................................................................................... 31 b) Production & Consumptions in Pakistan: ............................................................................. 31 c) Pakistan Imports from India .................................................................................................. 32 d) Indian Import Policy Conditions & Requirements for Tanning & Dyeing Chemicals ........ 33 4.5 Essential Oils and Resinoids/ perfume, cosmetic or toiletries (HS-33) ......................... 33
a) Pakistans Imports from India ............................................................................................... 34 b) Indian Import Policy Conditions & Requirements for Essential Oils & resinoids Chemicals35 4.6 Soaps/Detergents (HS-34) .............................................................................................. 35
a) Pakistan Exports to India: ..................................................................................................... 35 b) Pakistans Imports from India ............................................................................................... 36 c) Indian Import Policy Conditions & Requirements for Soaps/ Detergents Chemicals .......... 36 4.7 Albuminoidal substances (HS-35) ................................................................................. 37
a) Pakistan Exports to India ...................................................................................................... 37 b) Pakistans Imports from India ............................................................................................... 37 c) Indian Import Policy Conditions & Requirements for Albuminoidal Chemicals ................. 38 4.8 Explosives Chemicals (HS-36) ...................................................................................... 39
a) Indian Import Policy Conditions & Requirements for Explosives Chemicals ..................... 39 4.9 Photographic chemicals: (HS-37) .................................................................................. 39
a) Indian Import Policy Conditions & Requirements for Photographic Chemicals .................. 40 4.10 Miscellaneous Chemicals: (HS-38)............................................................................... 40
a) Pakistan Export to India ........................................................................................................ 40 b) Pakistans Imports from India ............................................................................................... 41 c) Indian Import Policy Conditions & Requirements for Miscellaneous Chemicals ................ 42
4
6.
Policies and Procedure for Chemical Industry ...................................................................... 43 6.1 Indian National Chemical Policy Initiatives .................................................................. 43
7.
Trade defense laws/Regulations for Chemicals Industry ...................................................... 45 7.1 (a) (b) Indian Regulations & Documentation Requirement in Chemical Sector: ..................... 45 Indian NTBs on Pakistani chemicals ............................................................................. 46 NTBs Product-Wise: ...................................................................................................... 46
8. 9.
Revealed Comparative Advantages (RCA) in Chemical Sector ........................................... 47 SWOT Analysis of Pakistans Chemical Sector: .................................................................. 49
10. Conclussion ........................................................................................................................... 53 11. Recomendations..................................................................................................................... 54 12 Annexture 55
1.
Introduction
The global chemical industry forms the fabric of the modern world. It converts basic raw materials into more than 70,000 different products, not only for industry, but also for all the consumer goods that people rely on in their daily life. Apart from this the chemical sector contributes in several other fields like agriculture, pharmaceuticals, textile, power, environment, communications, transport, infrastructure, housing, as well as covers thousands of commercial products like paper, paint, plastic products, soap/detergents, perfumes/fragrances, varnishes, pharmaceutical, dyes etc. In order to emphasize the importance of the chemical industry in meeting the key challenges for the future, the United Nations Organization proclaimed 2011 as the International Year of Chemistry. The chemical industry for their outputs/inputs of products (Export/Import) is predominantly based on the availability of feedstock of basic chemicals in that country. To address environmental concerns chemical companies are increasingly working towards reducing energy intensity of their operations, minimizing effluent discharge and pollution, increasing the share of recyclable products in their portfolio and diversifying their raw material base to include feedstock. Over the last 10 years, the share of Asia in global chemical sales has increased by about 14%1. In India and Pakistan the chemical industry is one of the oldest, which involved the production of basic chemical products to cater for the domestic needs. With the liberalization in 1990s, Pakistans basic chemical industry was exposed to international competition, reduced roles of government, insulation of high tariffs, import substitution policies, regulations, trade defense laws, intellectual property rights, patents, etc as well as gradual shifting of industry from production of basic chemicals to petrochemicals, pharmaceuticals, specialty chemicals, construction chemicals, dyestuffs, paints and agrochemicals etc. Over the years, some traditional sectors have developed, however the Chemical Industry in Pakistan is still at a very nascent stage. In early 50s, Pakistan Industrial Development Council (PIDC) was setup by the Government, for industrialization of the country. As a result a large chemical estate comprising Pak American Fertilizers, Maple Leaf Cement, Antibiotics (Penicillin) and Pak Dyes &
Global Chemical Outlook 2011 (UNEP)
Chemicals was established at Iskanderabad (DaudKhel), district Mianwali. This estate played an important role and served as a nucleus for chemical industry in Pakistan. In 1960s, another chemical complex was set up in private sector at Kala Shah Kaku, Lahore. Chemical factories also started emerging at Karachi due to the investment friendly policies which gave confidence to the investors. In early 1970s, private industries were nationalized with the result that the fast growing chemical sector started to decline. The growth of chemical sector could never pickup. The imports of chemicals are on increase in value and volume terms. In order to identify the key challenges and problems face by the chemical industry of Pakistan at domestic level as well as in trade with India. This study is focused around the following objectives, scope, limitations and methodologies. Objectives of the Study 1. 2. 3. 4. 5. Identification of Pakistans export potential, for the chemical sector, in India. Identification of Indias export potential, for the chemical sector, in Pakistan. Identification of segments of chemical industry which are not competitive vis a vis India. Identify the comparative tariffs of Pakistan and India for the particular product range. Identification of NTBs that need to be addressed to facilitate exports, of the specific sector, to India. 6. Have trade defense laws been used in this sector.
Scope and Methodology This working paper was initiated in the wake of normalization of Pakistan-India trade ties dialogue which was held on March 2012. Due to unavailability of latest trade statistics, the scope of this report is limited to Pakistan-India trade based on the 2010 statistics. The chemical industries in this paper are categorize on the basis of HS classification identified by State Bank of Pakistan (SBP), which includes, organic chemical, inorganic chemicals, fertilizers, tanning or dyeing extracts, essential oils and resinoids, Soaps, Albuminoidal substances, Explosives chemicals, Photographic Chemicals and Miscellaneous chemicals.
7
The methodology adopted in this report is based on descriptive statistics obtained from secondary sources. In addition, comparative analysis has also been done on the chemical sectors of Pakistan and India. The competitiveness of the sectors have also been determined by using revealed comparative advantage (RCA) criteria based on trade statistics for the year 2010. This report is based primarily on desk research. Due to time, resource and budgetary constraints interaction with stakeholders was not possible. The structure of the report is as follows; This chemical report deals with the market size of chemical sector in India and Pakistan, the major players of chemical production, government policies for the sector and other demand and supply side issues. The information provided in section II of this report was based on secondary sources. The section III of the report deals with trade analysis contains the pattern of Pakistans chemical sector exports and imports to world, destination markets and product composition. Whereas in section IV, similar analysis is carried out for Indias chemical sector trade pattern with the world and a detailed analysis of bilateral trade between Pakistan and India is conducted for the chemical sector. The same section of the report also encompasses the status of products covered in the chemical sector, whether it was in the positive list (now eliminated), if it is currently on the negative list or sensitive list, its liberalization status under SAFTA, MFN tariffs and preferential tariffs (if any). Similarly this section also deals with the identification of Pakistans and Indias comparative position with respect to chemical products. This analysis is done at the HS 6 digit level using Revealed Comparative Advantage Index. All calculations are based on Trade Map data. The section V explains the Indian national chemical policies initiative and procedures, Section VI deals with Indian regulations and documentation requirements on imports of chemical products, Indian NTBs on Pakistani chemical sector etc. whereas section VII reports revealed comparative advantage (RCA) of both countries in chemical sectors. While VIII highlights the SWOT analysis of chemical sector. The last two sections explain a comprehensive conclusion and recommendations for the future of Pakistans chemical sector exports growth and development.
2.
Classification of Chemical Industry:
For marketing purpose the chemical industry is divided into following main categories globally. Basic Chemicals: This category is also known as commodity chemicals which is
2.1
further subdivided into (i) Polymers: Includes basic chemicals like Polyethylene (PE), Polyvinyl Chloride (PVC), Polypropylene (PP), Polystyrene (PS), ethylene, polyester, nylon, acrylics etc. (ii) Bulk Petrochemicals & intermediates: Basically produced from Liquid Petroleum Gases (LPGs), natural gas and naphtha it includes chemicals like benzene, toluene, xylenes, methanol, vinyl chloride monomer (VCM), styrene, butadiene and ethylene oxide etc. These petrochemicals are used in the manufacturing of polymers, specialty chemicals and other organic chemicals. (iii) Other derivatives & Basic Industrial: Chemicals included in this subcategory are surfactants, dyes, pigments, resins, carbon black, explosives synthetic rubber and rubber products etc. (iv) Inorganic Chemicals: Inorganic chemicals include, salt, chlorine, caustic soda, soda ash, acids (such as nitric, phosphoric and sulfuric), titanium dioxide and hydrogen peroxide. It also includes fertilizers, phosphates, potash and ammonia chemicals.
2.2
Life science Chemicals: include differentiated chemical and biological substances,
pharmaceuticals, diagnostics, animal health products, vitamins and crop protection chemicals.
2.3
Specialty Chemicals: Products include electronic chemicals, industrial gases, adhesives
and sealants, as well as coatings, industrial and institutional cleaning chemicals, and catalysts.
2.4
Consumer Products: include direct product sales of chemicals such as soaps, detergents,
and cosmetics.
The chemical industry in Pakistan and India is classified as follows:
Classification of Chemical Industry in Pakistan A.
Classification of Chemical Industry in India
In Pakistan, the industry has been classified Chemical Industry in India has been classified into two sectors according to Chemical on the basis of chemical sub-segments. Industry Development-Vision 2030, 1. Primary Sector Chemical Industry: It is the classification of primary sector Industry based on the conversion of natural 1. Basic Chemicals: also known as commodity organic chemicals chemicals, includes inorganic
resources (ores) into primary products. In Pakistan this industry is well established, having large scale capital units, intensive highly and
chemicals, bulk petrochemicals, other chemical intermediates, plastic resins, manmade fibers, dyes & pigments and printing inks etc.
sophisticated,
technologically advanced. In Pakistan the following industries were considered as primary chemical Industry for production of primary chemicals. (a) Petroleum Refinery and petrochemical Industry involved in the production of petroleum intermediates, olefins 2. Special Chemicals: also known as performance chemicals and are derived from basic chemicals. The chemicals included in this category are paint, adhesives, oilfield
chemicals, flavors, fragrances, rubber processing additives, paper additives, industrial cleaners and fine chemicals. Sealants, coatings, catalysts are also included in this category.
(ethylene, propylene, butylenes) and BTX (benzene, toluene, xylene) all of which form the basis for the
development of monomers, polymers and plastic industries (b) Natural gas for the production of ammonia, methanol, fertilizers and associated products. (c) Mineral based industries consisting of
3. Agriculture Chemicals: These are classified as crop protection chemicals such as pesticides etc.
10
cement, limestone, gypsum, sand and salt (d) Smelting and refining of ferrous and non-ferrous metals (e) Agriculture and Farming Industries producing cotton, oils and fats, sugar, agricultural wastes (bio-mass) and raw materials for a large number of downstream industries. 2. Secondary Sector Chemical Industry: The principal objective of Secondary sector industries is to use Primary industries products in further manufacturing,
4. Whereas drugs, pharmaceutical and fertilizers industries are considered separately as independent sector in India.
processing, blending, fabricating plants for petrochemical plastics, intermediates, non-ferrous polymers, metals,
steel,
minerals, agricultural and miscellaneous products. These industries use medium- to high-sophisticated technology, and range from light to medium categories.
For the competitiveness analysis of chemical Industry, we classified the industry on the basis of HS classification categorized by state bank of Pakistan (SBP), which includes, organic chemical, inorganic chemicals, fertilizers, tanning or dyeing extracts, essential oils and resinoids, Soaps, Albuminoidal substances, Explosives chemicals, Photographic Chemicals and Miscellaneous chemicals classified chapter-wise ranging from HS-28, 29, 31, 32, 33, 34, 35, 36, 37 and 38.
11
3.
Global Trend Analysis of Chemical Industry
The global chemical industry, estimated at US$ 2.5 trillion2, is one of the fastest growing sectors of the manufacturing industry. Despite the challenges of escalating crude oil prices and demanding international environmental protection standards now adopted globally, the chemicals industry has still grown at a rate higher than the overall-manufacturing segment. The top ten major 0 1 World United States of America 2 3 4 5 6 7 8 9 10 18 93 Germany China Belgium Japan France Netherlands United Kingdom Ireland Republic of Korea India Pakistan 90.8 70.5 56.3 53.3 51.8 46.7 38.5 38.1 26.7 16.2 0.2 10% 7% 6% 6% 5% 5% 4% 4% 3% 1.7% 0.02% 945.7 108.5 11% Table: 1 Ranking Country 2010 % Shares
producers of chemicals are USA, Germany,
China, Belgium, Japan, France, Netherlands,
United Kingdom, Ireland and Republic of Korea. India is ranked 18th major exporter of chemicals,
while Pakistan ranked is 93rd in global exports of chemicals. However, US consumes approximately one-fifth of the global chemical consumption
Source: Trade Map (US $ billions) Chemicals included: (HS) 28,29,31,32,33,34,35,36,37 & 38
whereas Europe is the largest consumer with approx. half the consumption. The US is the largest consumer of commodity chemicals whereas Asia Pacific is the largest consumer of agrochemicals and fertilizers. As per calculations based on 2010 data of ITC, the organic chemical industry is the largest segment contributing about 39% of total global chemical trade, whereas miscellaneous chemical products contribute approximately 16%, inorganic chemical
2
STPF 2009-12
12
contribute about 12%, essential oils & resinoid contribute about 9%, Tanning or dyeing extracts contribute about 7% and agrochemicals (fertilizers) about 6% of the total global chemical industrial output. Commodity chemicals like soap/detergents contribute about 5%, albuminoids and photographic chemicals contribute 2% each in the chemicals market. 3.1 Trend Analysis of Pakistans Chemical Sector
Pakistan export chemical and chemical related products of worth US$ 0.17 billion and its imports of chemicals are also increasing both in terms of value and volume reaching US$ 3.9 billion in 2010, having a deficit of about US$ 2.83 billion. Due to high demands, Pakistan's chemical industry has gained much significance in attracting a foreign direct investment of US$ 253 million3 over the last five years. Currently, more than 20 well developed and 400 chemical manufacturing units4 are operating in Pakistan and many of them are specialized in the production of key chemicals with the steady progress and development of this industry. The rapidly changing economic scenario has reinforced the chemical sector local manufacturers to engage in import substitution by acquiring latest technologies and diversifying their product range to surpass the petroleum & chemical exports of US$ 0.17 billion in 2010.
Figure # 1 Source: Trade Map
3 4
BOI Chemical & Dyes Merchants 13
3.2
Trend Analysis of Indian Chemical Industry:
According to Indian chemical policy 2012, the chemical industry accounts for approximately 7% of GDP of India and the share of industry in national exports is around 11%. Although the growing Indian chemical sector is currently estimated to be worth $16 billion, nevertheless, the spread of the chemical industries has been uneven across different parts of the country giving rise to regional imbalances. Indian chemical sector ranks 18th in the world and 3rd in the Asia. It is also one of the largest industrial sectors in the Indian economy and an important employment generator. The Indian Chemical Industry comprises both small and large-scale units. Presently, there are about 40,000 chemical manufacturing units located in the country out of which about 80% are covered in the small scale sector. This sector provides employment to about 3.3 million people. Indian chemical industry exports dyes, pesticides and specialty chemicals to the developed world and to the developing countries which form about 2% share in the global market and contributes significantly to the foreign exchange basket of the country. In India 51% chemicals are produced in Gujarat, 8% in Maharashtra, 8% in Uttar Pradesh, 6% in Tamil-Nadu, 4% in Punjab and 23% in other states5. 4. a) Pakistan-India Bilateral trade of Chemical Industry Pakistan Export to India:
Pakistan exports only 36 tariff lines at HS-6 digit level of chemicals to India of worth US$ 39.72 million, which accounts about 39% of Pakistans total export of chemicals to world in 2010 (Table 4.1).These 36 tariff lines of chemicals, comprise of 14 tariff lines of organic chemicals, eight tariff lines of inorganic chemicals, five tariff lines of miscellaneous chemicals, four tariff lines of tanning of dyeing extracts, four tariff lines of soaps and one tariff line each of essential oils/resinoids, explosive chemicals and albuminoidal substances. Pakistans exports of these 36 tariff lines of chemical, accounts 1.3% of Indias total imports of chemicals from world in 2010, at an average applied tariff of 7.5% in 2010.
Ministry of Chemicals, India
14
Table: 4.1
Pakistan Export of Chemicals to India in 2010 (value: US Millions) Chapter Product Label No. of Product Line Average of Tariff Applied by India on Pakistan % 28 29 32 33 34 35 36 38 In-Organic Chemicals Organic Chemicals Tanning & Dyeing Chemicals Essential oils and resinoids Soap, organic surface-active Albuminoidal substances Matches Chemicals Miscellaneous chemical products Grand Total 8 14 4 1 2 1 1 5 36 6.95 6.47 8.13 10.00 10.00 15.40 10.00 7.50 7.58 16.42 40.82 8.27 1.11 0.40 8.47 20.33 13.29 109.11 11.36 25.74 0.04 0.02 0.02 0.35 0.38 1.81 39.72 188.22 2053.58 104.58 4.54 35.60 5.58 0.00 595.23 2987.33 5.07 14.90 8.23 1.09 0.38 5.22 0.00 11.47 46.35 Pakistan's exports to world Pakistan's exports to India India's imports from world Indicative potential trade
Source: Trade Map b) Pakistan Imports from India However, on the other hand, India exports about 325 tariff lines of chemicals to Pakistan of worth US$ 379 million
constituting an export share of about 3% of Indian global export of chemicals. India exports 48 tariff lines of organic chemicals, 180 tariff lines of inorganic chemicals, seven tariff lines of fertilizers, 28 tariff lines of tanning, dyes pigments, 11 tariff lines of toiletries, ten tariff lines of soap chemicals, six tariff lines
15
of albuminoidal chemicals, five tariff lines of photographic chemicals and 30 tariff lines of miscellaneous chemicals. The detailed analysis and comparison of chemicals are given below. Table: 4.2
Pakistan Imports of Chemicals from India 2010 US Millions Average of No. of Chapter Product Label Tariff Lines Tariff Applied by Pakistan on India % 28 29 31 32 33 34 35 37 38 In-organic Chemicals Organic Chemicals Fertilizers Tanning & Dyeing Chemicals Essential oils and resinoids Soap, organic surface-active Albuminoidal substances Photographic Chemicals Miscellaneous chemical products 48 181 7 28 11 10 6 5 30 326 5.3 6.3 0.7 12.1 12.6 14.5 10.8 5.0 9.2 7.3 87.45 1298.77 25.92 240.13 52.87 121.22 29.58 12.90 517.16 2386.00 8.90 260.67 1.15 41.97 3.24 11.83 0.37 0.15 50.93 379.20 1668.13 7044.84 28.38 1475.75 595.43 188.11 95.12 33.96 1472.18 12601.90 55.53 688.85 13.33 175.99 48.94 87.39 29.21 3.58 397.94 1500.76 Pakistan's imports from world Pakistan's imports from India India's exports to world
Indicative potential
Grand Total
Source: Trade Map c) Pakistans Negative List of Chemicals for India: Out of a total of 1209 items of negative list, Pakistan has included 65 tariff lines of chemicals in the negative list items, which is banned to be imported from India till 31st December 2012. However, the average custom duty on these 65 banned chemical items is about 19.4% for the year 2012.
Out of negative list of 65 chemicals tariff lines, around 8 tariff lines are from inorganic chemicals, 31 tariff lines from organic chemicals, 8 tariff lines from Tanning & dyeing Chemicals, 4 tariff lines from essential oils & resinoid chemicals, 3 tariff lines from Soaps/organic surface active chemicals, 4 tariff lines from albuminoidal chemicals/substances, 2 tariff lines from photographic chemicals and 38 tariff lines are from miscellaneous chemicals.
16
The detailed description of 65 tariff lines of chemicals, which Pakistan have banned to be imported from India, is given in Annexure I. Table 4.3
Pakistans Inclusion of Chemicals in Negative list for India in 2012 Chapter Chemical Sector No of Tariff Lines in Negative list Average Custom Duty applied by Pakistan CD% 28 29 32 33 34 35 37 38 Inorganic Chemicals Organic Chemicals Tanning & Dyeing Chemicals Essential Oils & Resinoids Chemicals Soaps, organic surface-actives agents Albuminoidal Substances Photographic Chemicals Miscellaneous Chemicals Grand Total 8 31 8 4 3 4 2 5 65 19.28 18.21 15 35 31.6 20 17.5 12 19.5
Source: Ministry of Industries Pakistan d) Indias Sensitive List of Chemicals for Pakistan under SAFTA: India has placed around 31 tariff lines of chemicals in sensitive list under SAFTA for non LCDs countries. The details of these chemicals are given below. Table: 4.4
Indias Inclusion of Chemicals in SAFTA sensitive list for Non-LDCs Chapter Chemical Sector No of Tariff Lines in Sensitive list Average Custom Duty applied by India CD% 28 32 33 34 35 36 38 Inorganic Chemicals Tanning & Dyeing Chemicals Essential Oils & Resinoids Chemicals Soaps, organic surface-actives agents Albuminoidal Substances Ristricted/Explosive Chemicals Miscellaneous Chemicals Grand Total 1 8 15 2 2 1 2 31 8 8 11.6 8 10 10 12 9.6
Source: Indian Ministry of Commerce

17
4.1
Organic Chemicals (HS 29)
a) Pakistan Exports to India: Out of Pakistans total exports of chemical of worth US$ 39.72 million to India, Pakistan exports only 14 tariff lines at HS-6 digit level of organic chemicals to India amounting to US$ 25.7 million having an export share of about 61.4% of Pakistans global export of organic chemicals and 0.15% of Pakistan total exports to world. Pakistan fulfils only 0.27% of
Indian global demand of organic chemicals, facing an average MFN tariff of about 10% on all organic chemicals. The major tariff lines items under organic chemicals category exported/supplied by Pakistan includes ethylene dichloride (HS 290315), which amounts to US$ 12 million. It fulfills 10% of Indian global demand (import) of the said chemical and faces SAFTA preferential tariff of about 6.8%. The second major tariff line exported by Pakistan is Terephthalic acid and its salts (HS 291376) of amount US$ 10.8 million. It fulfills 2% of Indian global imports of Terepthalic acid, and faces SAFTA preferential rate of about 8%. Another major tariff line is Phthalic anhydride (HS 291735) amounting US$ 1.5 million and fulfills 1% Indian global imports of Phathalic anhydride and faces SAFTA preferential rate of about 8%.in Indian market. The other eleven organic chemicals, which are supplied by Pakistan includes Acrylonitrile, Dioctyl orthophthalates, Ethylene glycol, Heterocyclic compounds, Imines, nucleic acids and antibodies, that collectively amounts to US$ 1.08 million and faces SAFTA average preferential rate of about 8%. Pakistan has sufficient export capacity for Pure Terephathalic Acid (PTA) and Poly Vinyl Chloride (PVC). Pakistan has an unexplored export potential of about US$ 31.97 million in
18
organic chemicals such as Terephthalic acid and its salts, Dioctyl orthopthalates and 1, 2dichloroethane (ethylene dichloride) etc chemicals in Indian market. b) Consumption & Production of Organic chemicals by Pakistan: Pakistans organic chemical industry could not flourish due to unavailability of basic building blocks such as Ethylene, Propylene, Butylenes & BTX (Benzene, Toluene, Xylene). As these products were used for the production of most of the organic chemicals that are employed as a raw material for a number of chemical sub-sectors such as; Pharmaceuticals, pesticides, dyes & pigments, Soaps & Detergents, Paints & Varnishes, synthetic Fiber, plastics & Resins, rubber Tyres & Tubes, Textiles Auxiliaries and Essential Oils & Perfumes.
These petrochemical building blocks can be derived from a Petrochemical complex, which generally consist of a Naphtha Cracker, whereas naphtha is a product of oil refineries and currently its production in the country is around 1,000, 000 Mn. Ton per annum6 which is being exported. The investors have remained shied away from the production of Naphtha cracker due to the reasons like highly cost intensive project, sophisticated technology involved, export market limitations, insufficient current tariff spread.
In chemical industry feedstock is the main source for the growth and development of chemical sector in any country. However, there are some alternate sources available in Pakistan having an edge over India like natural gas availability; Thar coal reserves and import of cheap natural gas from Iran, to produce basic petrochemical building blocks (Naphtha cracker) from; gasification of coal , dehydrogenation of associated gases and cracking of natural gas. This opportunity surely opens the gateway for the development of Petrochemical industry in Pakistan, which will support the local chemical & allied products industries in meeting their raw materials requirements and to save the valuable foreign exchange. The example of this development is obvious in synthetic fibres, soaps & detergent, dyes & pigments, Paints & Varnishes, while amongst intermediates Pakistan has sufficient capacity for Pure Terephathalic Acid (PTA) and
Chemical Development Vision 2030
19
Poly Vinyl Chloride (PVC). However, the imports of chemicals and allied industries stood around 20%, which is significant for a small economy of Pakistan. c) Pakistan Imports from India:
India exports about 181 tariff lines or products of organic chemicals to Pakistan valuing US $ 0.26 billion. About 15% of Pakistans imports of organic chemicals are directed from India, facing MFN tariff ranging from 0% on Meth-acrylic acid esters to 25% on penicillin etc. The major products of organic chemicals, which India exports to Pakistan includes P-Xylene of worth US $ 127 million, O-Xylene amounting US $ 20.5 million, Nucleic acids of worth US $ 13 million, heterocyclic compounds of worth US $ 34 million, amino-alcohols of worth US$ 4.9 million, erythromycin of worth US$ 4.7 million and antibiotics of worth US$ 4.74 million exported to Pakistan by India in 2010. All these products are facing average MFN rates of about 6.35% and SAFTA preferential rates of about 5%. The P-xylene only accounts 49% of Pakistans total import of organic chemicals from India, facing MFN duty and SAFTA preferential rate of about 5%, followed by O-xylene accounts 7.9% of Pakistans total imports of organic chemical from India facing MFN & SAFTA Preferential rate of about 5% duty, Nucleic Acid accounts 5.2% of Pakistans total imports of organic chemical from India facing MFN 11.6% duty (SAFTA preferential rate of about 5%). The other major products of organic chemicals exported by India to Pakistan includes, cyclic amides, sulphonamides, glycol, organo-sulphur compounds, amino acids, insulin, Vitamin E, aromatic compounds, acyclic ethers etc. It faces SAFTA preferential duty of about 5% in 2010. The data analysis revealed that India has a lot of potential to export organic chemical of worth US$ 798 million to Pakistan, facing an average applied tariff rate of about 6.0%. Whereas the major items/products of organic chemical in which India has potential in Pakistani market
20
includes P-xylene, Antibiotics, Nucleic acids, ethanediol, methanol, heterocyclic compounds, nitrile compounds, amino acids etc. Annexure III briefly explains the Indian potential of organic chemicals market position in Pakistan as well as applied MFN & SAFTA preferential rates on these products. d) Indian Import Policy Conditions & Requirements for Organic Chemicals The four major organic compounds included include methanol, acetic acid, formaldehyde, phenol and acetaldehyde. They constitute around 60% of total organic chemical produced in India and are protected by external competition by Indian government. In Indian Custom Policy, Government of India continues to provide duty protection to domestic manufacturers of organic chemicals. For example in case of phenol, the MFN custom duty of 7.5 % was maintained, whereas excise duty was reduced from 16% to 8%. Government also levied anti-dumping duty on import of phenol from countries such as USA, South-Korea and Taiwan. In Indian Import policy, the following five major import regulations were applied on the import of 57 tariff lines of organic chemicals. India has imposed restriction on the import of about 25 tariff lines of organic chemicals. One tariff line of organic chemical is subject to imposition of SPS regulation (BIS certification). Import of 5 tariff lines permitted subject to registration and other requirements as administered by Drug Controller General of India under the provisions of Drugs and Cosmetics Act. Similarly, import of 25 tariff lines of organic chemicals were subjected to actual users against a license from a country which is a party to the Montreal Protocol on Substances that Deplete the Ozone Layer. No. Indian Import Policy Regulations for organic chemicals No. of TL I Import is permitted by actual users against a license from a country which is a party to the Montreal Protocol on Substances that Deplete the Ozone Layer. List of countries which are parties to the Montreal Protocol will be notified by Director General II Imports are permitted subject to Registration and other requirements as administered by Drug Controller General of India under the provisions of
21
25
Drugs and Cosmetics Act III IV V BIS (only required for Hexane, food grade) SPS Requirement Restricted 1 1 25 57
Grand Total Source: Indian Ministry of Commerce
The above Indian import policy regulations depict Indian high protection of its domestic organic chemical industry. 4.2 Inorganic chemicals (HS-28)
Pakistan made a considerable progress in the production of basic inorganic chemicals such as Soda Ash, Caustic Soda, Sulphuric Acid & Chlorine. In Pakistan, sufficient production capacity of these chemicals is available, not only to cater the needs of the local industry but surplus production is being exported around the world. In Pakistan the import of inorganic chemical products are negligible. a) Pakistans exports to India: Pakistan exports only 8 tariff lines of inorganic chemicals to India of value US$ 11.35 million. It accounts for about 38% of Pakistan global exports of inorganic chemicals. About 82.58% of Pakistans total export of inorganic chemical
comprised of only one product that is Disodium carbonate, whereas the remainder 14.98% constitutes of hydrogen peroxide, 1.4% constitutes of Ammonium chloride and 0.6% constitutes of sodium bicarbonate
in 2010. All of these 8 tariff lines face an Indian average MFN duty of about 10% and average SAFTA preferential duty of about 5%.
22
India fulfills about 0.4% of its global import of inorganic chemical from Pakistan. The basic inorganic chemical products that were exported by Pakistan to India includes, disodium carbonate of value US$ 9.3 million, (fulfills 11.2% of Indian global imports) faces MFN tariff of about 10% and SFTA preferential rate of about 6.5% in Indian market. Pakistan exports hydrogen peroxide of value US$ 1.7 million to India (fulfills 20.08% of Indian global imports), faces SAFTA preferential rate of about 6.5%. Similarly, Pakistan exported ammonium chloride of value US$ 159 thousands to India (fulfills 5.3% of Indian global imports), faces 6.5% SAFTA preferential rate. Export of sodium bicarbonate of value US$ 67 thousands (fulfills 1.5% of Indian global import) faces SAFTA preferential rates of 6.5% duty. Whereas exports of caustic soda (solid) amounts to US$ 31 thousands (fulfills 0.6% of Indian global import) faces 6.5% SAFTA preferential duty. Whereas Pakistan exports sodium sulphate and calcium hypochlorite of value US$ 20 thousand to India. Pakistan has an unexplored export potential of about US$ 11.8 million worth of inorganic products to India. The potential exportable inorganic chemicals products which can made inroads into India can be disodium carbonate, hydrochloric acid, calcium chloride, silicates of sodium, hydrogen peroxide and sodium bicarbonate. Whereas in zinc oxide Pakistan have an unexplored export potential of about US$ 547 thousands to Indian market in 2010, is placed in SAFTA sensitive list for Non-LDCs by India. For details regarding bilateral trade potential and applied MFN & SAFTA preferential rates please see Annexure IV b) Consumption & Production of Inorganic Chemicals in Pakistan7: The key inorganic chemicals or Chlor-Alkali industry produces three main chemicals like (1) Caustic soda (2) Soda Ash (3) Chlorine. Caustic Soda: Presently, there are four plants with production capacity around 435,000 MTPY of Caustic Soda. Local consumption of the caustic soda was increased with a compound annual growth rate of 7%. Electricity is a major cost component in the manufacturing of caustic soda, account for about 60% of overall cost of production. Existing energy (Electricity & Natural gas) crises have badly impacted the local production. Alone textile sector of Pakistan consumes 43%
7
Chemical Development Vision 2030
23
of caustic soda. Whereas 19% of caustic soda. Is consume in the manufacturing of soap & detergent. Local demand of caustic soda declined because of decline in exports of textile sector, after recession in the international market. It is expected that in future conditions will improve and demand will grow at a rate of 7%. Demand of caustic soda is expected to expand to 350,000 MTPY in the next 5 years. Soda Ash: In Pakistan there are two soda ash plants having production capacity of 470,000 metric tons per year. Both plants producing soda ash are located in the Salt Range area. In 2010, the local market production of soda ash in the country is about 365,000 million tons. About 43% of soda ash production mainly consumed in the production of glass & silicate industry, 28% of soda ash consumed in the production of textiles, 7 % soda ash used in the manufacturing of detergents & soap, 9% soda ash used in the production of baking powder and 11% in paper production. As mentioned earlier Pakistans existing production capacity of soda ash is about 470,000 MTPY while local market demand is about 364,000 and therefore has enough surplus capacity of 106,000 million tons to export in regional and international market. Sodium Ash: At present, Akzonobel Pakistan and Olympia chemicals have a combined capacity of about 40,000 MTPY to produce sodium bicarbonate. Sindh Alkalis Karachi has a capacity of 10,000 MTPY but the plant is not operating since 2000. Sodium Bicarbonate is used in drugs manufacturing, bakery & food products and beverages. Besides local production imports were also made in the recent years but are on the decline. Collective share of local manufacturers in the local market was about 79% and share of import was 21%. Pakistan exports inorganic chemicals of worth US$ 29 thousands to world and the major export destination of Pakistans inorganic chemicals are India, UAE, Canada, Bangladesh, Sri-Lanka, Afghanistan and Singapore etc.
24
c) Pakistan Imports of inorganic Chemicals from India: On the other hand, from the statistical analysis it is analyzed that India exports 48 tariff lines (HS-6 digit level) of inorganic chemicals to Pakistan of value US$ 8.9 million, which fulfills 2.1% of Pakistans global demand of inorganic chemicals. India exports only 0.4% of its global export of inorganic chemicals to
Pakistan, faces MFN applied tariffs ranging from 0~20% and SAFTA preferential rates of about 5%.
About 28% of Pakistan total imports of inorganic chemical from India constitute of Aluminum hydroxide, 21% constitutes Dithionites and sulphoxylates of sodium, 19% constitutes of Dithionites and sulphoxylates of metals nes, 7% of Argon and 4% zinc peroxide etc.
In 2010, the major inorganic chemical, which India exports to Pakistan includes aluminum hydroxide of value US$ 2.5 million, (fulfills 69.9% of Pakistan import demand of aluminum hydroxide), faces SAFTA preferential duty of about 5%. Followed by Dithionites & sulphoxylates of sodium of value US$ 1.8 million,(fulfills 18.9% of Pakistans import demand) faces SAFTA & MFN tariff of about 5% and Dithionites and sulphoxylates of metals nes of value US$ 1.6 million, (fulfills 31.7% Pakistans import demand) faces MFN duty of about 5%. The other chemicals, which India has exported to Pakistan includes, argon, zinc oxide, chlorides, calcium phosphates, nitric acids, sodium sulphates, iodides, ammonium chloride, aluminum oxides, sulphates, chlorides, silicates, magnesium peroxide, sodium dichromate, calcium carbonate etc, which collectively amounts to US$ 2.9 million. Whereas the products in which India has an unexplored export potential of in-organic chemicals in Pakistani market are of sulphates of metal of worth US $ 9.9 million, titanium oxide of worth
25
US$ 9 million, dithionite of sodium of worth US $ 7.8 million, phosphoric acid of worth US$ 7 million, Disodium carbonate of worth US $ 4.4 million, sodium dichromate of worth US $3.2 million and other chemical includes, iron oxide, carbonates of metal, dicalcium phosphates, calcium carbonate, aluminum oxide, Iodine, sodium sulphites, caustic potash etc. India exports inorganic chemical of worth US$ 2.3 billion to the world and major destination of Indian inorganic chemical exports are Iran, Ukraine, Bahrain, China, UAE, Indonesia, USA, Japan, SriLanka, Germany, Saudi Arabia, Bangladesh, Belgium and Vietnam etc. For detailed bilateral trade potential, MFN duty and SAFTA preferential rates see Annexure V d) Consumption & Production of inorganic Chemicals in India: In India caustic soda demand has increased from 1.86 Mn.ton in 2005 to 2.5 Mn.ton in 2010. Whereas production of caustic soda has increased from 1.81 Mn ton in 2005 to 2.25 Mn ton in 2010 and capacity by 2.1 Mn ton and currently imports 370.2 (`000 tones) of caustic soda from abroad. Chlorine: Consumption in India has increased from 1.9 Mn ton in 2005 to 2.7 Mn tons in 2010, whereas production is 611 thousand tons. Soda Ash (Sodium Carbonate), mainly produced from salt, the domestic demand of soda ash in India has increased from 2.16 Mn tons in 2005 to 2.51 Mn T in 2010. Currently India exports about 253 thousand tons of soda ash, whereas its imports are about 600 thousand tons in 2010. This could be a big opportunity for Pakistan to capture this market. Pakistan exports soda ash of value US$ 13.1 million to world, whereas the top three export destination of Pakistans Soda Ash are India (US4 9.3 million), Bangladesh (US$ 1.6 million), South Africa (US$ 1.1 million). The other major destination where Pakistan exports soda ash includes UAE, Sri-Lanka, Indonesia, Afghanistan and Somalia. India imports Soda Ash of worth US$ 83 million from world. The countries from which India imports Soda Ash are Ukraine of worth US$ 16 million, Kenya (US$ 15 million), Bulgaria (US$ 12 million), China (US$ 8 million), Turkey (US$ 7 million) and Pakistan ranked at 6th position from where India imports Soda ash. e) Indian Import Policy Conditions & Requirements for Inorganic Chemicals According to Indian import policy regulation about 14 tariff lines of inorganic chemicals in India are restricted to import. Whereas 14 tariff lines of inorganic chemicals are permitted subject to
26
section 14(1)(ii) of the Atomic Energy Act, 1962 and Rules. Similarly import of two tariff lines i.e. Import of Boric Acid for non-insecticidal purposes will be subject to an import permit issued by the Central Insecticide Board & Registration Committee under the Ministry of Agriculture.
Whereas import of thorium nitrate is subject to section 14(1)(ii) of the Atomic Energy Act, 1962 and Rules there under. Similarly, import of carbon black is subject to permitted freely provided Cost, Insurance and Freight (CIF) value is Indian Rs. 80,000/- PMT and above. Import of items, priced below Indian Rs. 80,000/- PMT shall be restricted.
Indian Import policy Regulations for Inorganic chemicals I Import is subject to section 14(1)(ii) of the Atomic Energy Act, 1962 and Rules there under II Import of Boric Acid for non-insecticidal purposes will be subject to an import permit issued by the Central Insecticide Board & Registration Committee under the Ministry of Agriculture III Import of thorium nitrate is subject to section 14(1)(ii) of the Atomic Energy Act, 1962 and Rules there under IV Import permitted freely provided CIF value is Rs. 80,000/- PMT and above. Import of items, priced below Rs. 80,000/- PMT shall be restricted. V Restricted
On No of Tariff Lines 10
14 28
Grand Total Source: Indian Ministry of Commerce
27
4.3
Fertilizers (HS-31)
Being an agricultural based country, Pakistan mainly imports fertilizers from abroad of value US$ 649 thousand in 2010. Pakistan Imports fertilizers particularly from top five countries such as China of worth US$ 140 thousands, followed by Saudi Arabia (US$ 123 thousands) USA (US$ 52 thousands), Tunisia (US$ 45 thousands) and Russia (US$ 43 thousands) to fulfill its domestic needs or consumption. In
order to facilitate the agriculture sector government has imposed 0% duty on 23 tariff lines or products of fertilizer category. Pakistan does not export a single tariff line of fertilizer to the world. a) Pakistan Imports from India In 2010, Pakistan imported 7 tariff lines/products of fertilizer from India of value US$ 1.15 million, which faces MFN 0% duty. Whereas average applied SAFTA preferential rates applied by Pakistan on fertilizers is about 5% for Non- LDCs. The major items supplied by India to Pakistan were fertilizers nes of value US $ 407 thousands, nitrogenous fertilizer of value US $ 325 thousands, phosphorous/potash fertilizers of value US$ 204 thousands and sodium nitrate of US $ 111 thousands in 2010. The other products under this category imported by Pakistan from India include ammonium nitrate, animal fertilizer and potassium chloride collectively of value US $ 107 thousands. India has an opportunity to capture US$ 13 million worth of fertilizers market of Pakistan at 0% duty. For further details regarding fertilizer trade potential, MFN duty and SAFTA preferential rates see Annexure VI
28
b) Consumption & Production8in Pakistan: Fertilizer sector is the second largest consumer of gas after power sector. Due to gas shortages the domestic fertilizer industry witnessed positive trend in production during the year 2010-11. The production in nutrient terms has increased from 3082 thousand tons during 2009-10 to 3143 thousand tons during 2010-11 showing an increase of 2.0 percent. Nitrogen production was 2708 thousand tons during 2010-11 and recorded an increase of 1.4 percent (86.2 percent share in total production), phosphate 424 thousand tons (13.5 percent share in total nutrient production), which increased by 5.2 percent. Potash blends production was 11 thousand tons and was high by 10.0 percent over previous year (0.3 percent share in total nutrient production). Engro Chemical has installed a new urea plant with annual capacity of 1300 thousand tones, which will become operative in March, 2011 but is again closed on account of gas shortage and as soon as the gas supplies become smooth, it will start production. This will reduce the quantum of total fertilizer imports of the country, especially of nitrogenous (urea) one. Pakistan needs an addition of 100 -150 thousand tons per annum in the production capacity of Urea and Di-Ammonium Phosphate (DAP) to meet its fertilizer requirements for crop sector up to 2025 and for this purpose an integrated large scale fertilizer complex (Urea, DAP, NPK) following a modular approach within an industrial park concept should be the main thrust of national fertilizer strategy. To attract the investment in fertilizer sector, the government has extended the implementation of latest fertilizer policy of 2001 till 30th June, 20129. c) Indian policy/subsidy on fertilizers: India has introduced nutrient based subsidy scheme (NBS) which was in effect from April 2010 to encourage balanced fertilizer consumptions in India. As per policy the subsidy on complex fertilizer would be calculated based on the nutrients level and not on the product level. Through this regulation government has changed the subsidy from constant farm gate prices to constant subsidy. Producer now have the freedom to charge retail prices but the result has not been encouraging. Urea has been kept out of this policy, but its maximum retail price was increased by 10%.
8 9
Economic Survey of Pakistan 2010-11 Economic Survey of Pakistan 2010-11 29
In order to discourage import of fertilizer, India initiated new Urea Investment Policy 2010 by revamping existing unit through green field projects at Institutional placement Program India (IPP) linked prices. d) Indian Import Policy Conditions & Requirements for Fertilizers Chemicals Pakistans exports of fertilizers to India are subject to following regulations; export of Urea (HS31021000) is allowed though state trading corporation (STC), Minerals and Metal Trading Corporation India (MMTC) and Indian Potash Limited subject to Foreign Trade Policy and is under the control of state trading enterprise. Whereas according to Indian Import policy animal dung and other animal excreta is restricted to be imported in Indian. No. I Indian Import Policy Regulations Import allowed through STC, MMTC and Indian Potash Limited subject to Para 2.11 of Foreign Trade Policy II III Restricted State Trading Enterprise 2 1 4 No. of Tariff Lines 1
Grand Total Source: Ministry of Commerce India 4.4 Most Tanning or dyeing extracts (HS-32) of the raw materials and
intermediates for dyes & pigments, paints & varnishes, pesticides and plastics imported & plasticizers are These being raw
by Pakistan.
materials and intermediates mainly belong to or derived from
petrochemicals, which have no base in Pakistan. Pakistan imports tanning or dyeing chemicals of worth US$ 316 thousands from world. Pakistan imports
Figure # 9 Source: Trade Map 30
tanning or dyeing chemicals mainly from China of worth US$ 91 thousands, followed by India (US$ 41 thousands), Germany (US$ 32 thousands), Korea (US$ 30 thousands), Switzerland (US$ 12 thousands) and Italy (US$ 10 thousands) etc.10 a) Pakistan export to India Pakistan exports only 4 tariff lines at HS-6 digit level of tanning or dyeing chemicals of value US$ 40 thousands to India in 2010. The products supplied by Pakistan to India includes synthetic organic products, reactive dyes, paints and varnishes based on polyesters facing an average applied MFN tariff of about 10% and average applied SAFTA preferential rates of about 8%. The products such as reactive dyes, synthetic organic pigment and inorganic coloring matter, in which Pakistan have an unexplored potential of about US$ 7 million were placed in sensitive list by India under SAFTA arrangement. For detail trade potential in dyes chemicals, MFN rates and SAFTA rates please see Annexure VII Pakistan export about US$ 28.4 million worths of tanning & dyeing chemicals to world. The major export destinations of Pakistans tanning and dyeing chemicals are Afghanistan (US$ 18 thousands), Bangladesh (US$ 4 thousands), UAE (US$ 775 hundreds), Saudi Arabia, China and Turkey etc. whereas its exports to India worth only US$ 40 thousand in 2010, which is about 0.1% of Pakistans total export of dyes & pigments. Pakistan has an unexplored potential of about US$ 28 million to export dyes & pigments to India, which may face an average ad-MFN tariff of about 10%. The major items under dyes & pigment chapter in which Pakistan has potential to Indian market includes paints & varnish of polymers/vinyl polymer, reactive dyes, synthetic organic pigments etc. b) Production & Consumptions in Pakistan: Titanium Dioxide: There are two industrial grades of titanium dioxide pigment: (i) Rutile-grade used for the manufacture of paints and plastics and (ii) Anatase-grade used in Polyester Fiber and paper industry.
10
Trade Map
31
Pakistan has ability to establish a 10,000 MTPY facility11 to manufacture anatase grade to cater needs of polyester fiber industry of Pakistan. Sulfuric acetone of the major raw materials is being manufactured in Pakistan and other material Ilmenite12 can be either imported or locally available Ilmenite can be upgraded. Production of Basic Chromium Sulphate from Chromite (Cr2SO4): Presently the entire demand for Basic Chromium Sulphate (BCS) used for leather tanning, is being met from imports as well as from local production. Considerable manufacturing capacity for BCS from chromite is presently unutilized due to the closure of two plants for various reasons. Barring small production of BCS from chromite, at Industrial Chemicals, Karachi. The entire local production of BCS is confined to the manufacture of BCS from imported sodium dichromate. This needs to be discouraged as the value addition in the case of BCS to be manufactured from Chromite is far greater than BCS produced from sodium dichromate. Moreover the foreign exchange savings are much higher in the BCS production from Chromite as compared to BCS produced from sodium dichromate. c) Pakistan Imports from India From the statistical analysis it is explored out that India export 28 tariff lines /products under tanning & dyeing extracts to Pakistan of value US$ 41 million facing MFN duty from 5~20%. About 44% of Pakistans total imports of dyes & pigments
constitutes of reactive dyes, 14% constitutes of acid & mordant dyes, 10% of synthetic organic pigments etc.
11 12 Figure # 10 Source: Trade Map
Chemical Development vision 2030 Magnetic titanium oxide 32
The major lines items exported by India to Pakistan includes reactive dyes of US $ 18.52 million, while facing an MFN tariff of about 15%, followed by acid and mordant dyes of value US$ 5.9 million, synthetic organic pigment of value US$ 3.9 million, tanning extracts of US$ 3.5 million, synthetic organic tanning of US$ 2.7 million, basic dyes of values US$ 2.0 million and inorganic tanning substance of value US $ 1 million. The other minor products of tanning or dyeing extract exported by India were disperse dyes, vitamin dyes, direct dyes etc accounts US$ 5.0 million in 2010. Currently India export about US$ 41 million of tanning & dyeing chemicals to Pakistan, contributing 13% of Pakistans global import of tanning & dyeing chemicals. Whereas India has an un-explored potential of about US$ 216 million to export tanning & dyeing pigment to Pakistan in 2010. The other major products/items in which India has potential to export tanning & dyeing
chemicals to Pakistan includes synthetic organic pigments, reactive dyes, acid & mordant chemicals, synthetic organic coloring, printing ink, direct dyes, vitamin dyes and disperse dyes etc. See annexure VIII for detailed analysis of trade potential, MFN rates and SAFTA preferential rates on tanning & dyeing chemicals by Pakistan. d) Indian Import Policy Conditions & Requirements for Tanning & Dyeing Chemicals According to Indian import policy for import of HS32019090, other for specified food color requires Bureau of Indian Standards (BIS) certification. No. Indian Import Policy Regulations I BIS (required only for specified food color) (HS-32019090, other) No. of Tariff Lines 1
Source: Ministry of Commerce India 4.5 Essential Oils and Resinoids/ perfume, cosmetic or toiletries (HS-33)
Whereas Pakistans export of essential oil to world accounts US$ 10.2 million, While Pakistan exports only one tariff line of cosmetic or toiletries i.e. Eye make-up preparations (HS-330420) of value US$ 19 thousands to India facing an average MFN applied tariff of about 10% in 2010. India has placed about 14 tariff lines at 6 digit level items of resinoids/perfumes/ cosmetic/toiletries in sensitive list under the SAFTA arrangement.
33
Pakistan has an unexplored export potential of about US$ 9.8 million of cosmetic toiletries to India. The potential items, which Pakistan can export to India includes beauty or makeup preparations, eye makeup preparations, hair preparations, perfumes, dentifrice, deodorants and shampoos etc. Pakistans top ten potential export products under essential oils chapters are mentioned in Annexure IX. The annexure also explains that out of top ten Pakistans potential export products to India, out of which 8 tariff lines were placed in sensitive list by India. a) Pakistans Imports from India The figure 11 depicts that Pakistan imports US$ 9.05 million worth of chemical cosmetics & toiletries from world. Whereas its imports from India worth US$ 3.23 million in 2010, which accounts 3.6% of Pakistans total imports of chemical cosmetic & toiletries. About 80% of Pakistans imports of essential oils/cosmetic & toiletries from India constitutes of mixtures of odoriferous substance, while 11% constitutes of perfumes and toilet waters, 4% constitutes of oils of peppermint and 2% of essential oils. The average
MFN rates applied by Pakistan on the essential oils/cosmetic & toiletries similarly is the about duty 28%, under
SAFTA is about 5% for non LDCs. India exports only 11 tariff lines to Pakistan, the major products which India export to Pakistan
includes mixture of odoriferous of US$ 2.5 million, facing MFN rates of about 10% and SAFTA rates of about 5%. Followed by perfumes of US$ 372 thousands, oil of peppermint of US$ 117 thousands and essential oil nes of US$ 57 thousands etc. Despite of these major exports, India has a potential to export US$ 85 million of essential oils/cosmetic/toiletries to Pakistan in 2010. The other items in which India has potential to export in Pakistan includes mixtures of odoriferous substance, hair shampoos, odoriferous substance for
34
food/drink industry, deodorants, perfumes, powder and skin care substances etc. For further details regarding Indian potential export of essential oils to Pakistan, as well as applied MFN rates and SAFTA rates by Pakistan on these products see Annexure X. b) Indian Import Policy Conditions & Requirements for Essential Oils & resinoids Chemicals If we analyze the import regulations of India, almost 48 tariff lines of essential oils, resinoids, cosmetic and toiletries are subject to be exported to India by fulfilling conditions of Drugs and Cosmetic Acts & Rules of India, whereas import of one tariff line is subject to provision of convention of international trade in endangered species of wild fauna and flora (CITES) i.e. agar oil is restricted to be imported to India. No. I II Restricted Import will be subject to the provisions of Convention of International Trade in Endangered Species of Wild Fauna & Flora (CITES). III Drugs & Cosmetics Acts & Rules Total Source: Ministry of Commerce India 4.6 Soaps/Detergents (HS-34) 48 50 Indian Import Policy Regulations No. Of Tariff Lines 1 1
a) Pakistan Exports to India: In 2010, Pakistan export about US$ 14.85 million worth of soaps and detergents to world, whereas in Soap and Detergents Pakistan exports only two tariff lines of value US$ 21 thousands to India, which includes anionic surface-active agents of US$ 7 thousand worth and Non-ionic surface active agents of US$ 14 thousands worth to India, facing an applied MFN tariff of about 10%, whereas under SAFTA the applied duty on this product is about 8%. India has placed only two tariff lines at 6 digit level of Soap/Detergents in sensitive list under SAFTA arrangement. Pakistan has a potential of about US$ 14 million to export soap & detergents to India which includes major items such as soap & organic surface agents, toilet soaps, washing & cleaning surface-active preparations, soaps, polishers etc. For further details please see Annexure XI.
35
b) Pakistans Imports from India On the other hand Pakistan imports only 10 tariff lines of US$ 11.85 million worth of soaps and detergents from India. About 84.8% of Pakistans imports of soaps/ detergents from India constitutes of anionic surface agents, 11.2% of non-ionic surface active agents, 1.3% of organic surface active agents, 1.2% of artificial waxes, 1.1% of lubes for textile/leather and 0.4% of other soap/detergents. All these products faces an average applied MFN rate of about 18.4%, whereas under SAFTA, these product lines faces average duty of about 5%. India fulfills about 25% of of
Pakistans
global
demand
anionic surface active agents (US$ 10 million), whereas fulfils about 5.1% of Pakistans global demand of non-ionic surface active agents (US$ 1.3 million) and about 6.8% of Pakistans global demand of organic surface active agents is fulfilled by India. India has an unexplored export potential of about US$ 119.6 million worth of soaps/detergents products to Pakistan. The products in which India has potential are anionic surface agents, non-ionic surface active agents, washing & cleaning agents, lubricating preparations, toilet soaps, soaps etc. For details please see annexure XII. c) Indian Import Policy Conditions & Requirements for Soaps/ Detergents Chemicals India has restricted imports of two tariff lines of soap/detergents; whereas on another two tariff lines imports were subjected in terms of Rotterdam convention on Prior Informed Consent (PIC) procedure for hazardous chemicals and pesticides; while imports of six tariff lines are subject to fulfill Drugs & Cosmetics Acts & Rules of India.
36
No. I II
Indian Import Regulations Restricted Import is restricted in terms of Interim PIC Procedure of Rotterdam Convention on Prior Informed Consent procedure for hazardous chemicals and pesticides
No. of Tariff Lines 2 2
III
Drugs & Cosmetics Acts & Rules Total
6 10
Source: Ministry of Commerce India 4.7 Albuminoidal substances (HS-35)
a) Pakistan Exports to India Under Albuminoidal substance Pakistan exports only one tariff line i.e. gelatin and gelatin derivatives of value US$ 354 thousands to India facing an applied MFN tariff of about 30%, whereas under SAFTA the duty imposed by on this products is about 11.6%. Pakistan has an unexplored export potential of about US$ 6.0 million in products like gelatin, glues, Dextrins, starches, enzymes, and adhesives of rubber or plastic. India has placed two tariff lines of Albuminoidal substance (HS-35) under the sensitive list under SAFTA for Pakistan. The details about Pakistan potential export to India and the duty faced by these products in Indian markets is given in Annexure XIII. b) Pakistans Imports from India On the other hand Pakistans imports only seven tariff lines of
albuminoidal
chemicals/substances
from India of US$ 371 thousands,
which accounts about 1.1% of Pakistans global import of albuminoidal substance in 2010. The
37
average applied MFN duty by Pakistan on these albuminoidal substances is about 12%, while the average applied SAFTA preferential duties by Pakistan on these similar products are about 5%. About 60% of Indian export of albuminoidal exports to Pakistan constitutes of enzymes, 16% constitutes of adhesive based on rubbers, 12% constitutes of about Dextrins, 5% constitutes of glues, 5% constitutes of peptones substances and 2% constitutes of concentrates etc. India export enzymes of US$ 222 thousands of worth to Pakistan, fulfils about 1% of Pakistans global demand of enzymes, similarly India fulfils about 20% of Pakistans global demand of adhesive of rubbers or plastics of worth US$ 59 thousands etc. Whereas India has an unexplored export potential of albuminoidal chemicals of worth US$ 34 million to Pakistan and the major products in which India has potential to export includes enzymes, adhesive or rubbers or plastics, Dextrins, gelatin, glues, casein, peptones and egg albumin to Pakistan. For detailed potential and applied MFN as well as SAFTA duties please see Annexure XIV. c) Indian Import Policy Conditions & Requirements for Albuminoidal Chemicals Export of some albuminoidal chemicals to India has to face the following restrictions according to the regulation of Indian import policy. About 3 tariff lines India has imposed health protocol, whereas import of four tariff lines of albuminoidal substances are prohibited, four tariff lines imports are banned (not permitted to be imported). However imports of four tariff lines are subjected to wild life protection Act 1972 and CITES and 1 tariff line require (Protection) Act, 1972 and Conventional on International Trade in Endangered Species (CITES), where BIS required only for food grade.
No. I II III IV V Indian Import Policy Regulations Health Protocol (SPS Requirement) Prohibited Not permitted to be imported Subject to Wild Life (Protection) Act, 1972 and CITES. (Protection) Act, 1972 and CITES. BIS(required only for food grade) Total No. of Tariff Lines 3 4 4 4 1 16
Source: Ministry of Commerce India

38
4.8
Explosives Chemicals (HS-36)
Under the explosive chemicals Pakistan exports only one tariff line i.e. matches (360500) of value US$ 378 thousands to India, which faces an applied ad-valorem tariff of about 10%. Trade of explosive is prohibited by both countries. a) Indian Import Policy Conditions & Requirements for Explosives Chemicals According to Indian import policy regulations, 19 tariff lines of explosives are restricted to be imported. Import of explosives may be permitted to Government Departments and Public Sector undertakings on the recommendation of the Controller of Explosives, Government of India. Similarly 20 tariff lines of explosives are subject to prohibitions under Section 11 of Customs Act, 1962 (India). 4.9 Photographic chemicals: (HS-37)
Pakistan imports Photographic chemicals of worth US$ 26 thousands from the world. Pakistan imports photographic chemicals from countries such as Belgium, Japan, China, Germany and Netherlands. India is the 11th major exporter of photographic chemicals to Pakistan. Pakistan does not export a single tariff line of photographic chemical to India, whereas on the other hand India exports only five tariff lines of worth US$ 146 thousands to Pakistan, which accounts 0.6% of Pakistans global imports in 2010. Pakistan imports of photographic
chemical from India comprised of chemical preparations (41%), photo film rolls (33%), cinematographic film (12%), film color (9%), photographic plates and films (5%). India export sensitized emulsion
preparations of worth US$ 60 thousands, fulfils about 8% of Pakistans global demand of the said products, followed by chemical preparations of US$ 49 thousands, which fulfills 2% of
39
Pakistans global demand of chemical preparations. Similarly India fulfils about 20% of Pakistan global demand of photo paper and about 4% of demand of cinematograph film in 2010. The average applied MFN duties imposed by Pakistan on Photographic chemicals are about 5.2%.However, Pakistans SFATA preferential duty on photographic chemicals is about 5% for non-LDCs (India). Through indicative potential analysis, India has an unexplored export potential of value US$ 5 million of photographic chemical to Pakistan in 2010. The major lines items in which India has potential to export to Pakistan includes chemical preparations used for photographic chemical, photographic film, photo films, photo plates, cinematographic film and sensitized emulsions etc. For further details regarding Indias export potential of photographic chemicals to Pakistan along with face duties is given in annexure XV. a) Indian Import Policy Conditions & Requirements for Photographic Chemicals According to Indian import regulations about 24 tariff lines of cinematograph films and other films shall be governed by the provisions of Public notice no. 64/1997-2002 dated 29.01.2002. No. I Indian Import Policy Regulation Import of cinematograph films and other films shall be governed by the provisions of Public notice no. 64/1997-2002 dated 29.01.2002 Source: Indian Ministry of commerce 4.10 Miscellaneous Chemicals: (HS-38) No of Tariff Lines 24
a) Pakistan Export to India Under miscellaneous chemicals Pakistan exported 5 tariff lines at HS 6 digit level of value US$ 1.81 million facing an applied ad-valorem tariff of about 7% in 2010. The major items of miscellaneous chemicals exported by Pakistan to India include, insecticides of value US $ 1.5 million, which fulfills 4.2 % Indian global demands.
40
The
other
major
chemical
products exported by Pakistan to India includes chemicals nes of value US$ 141 thousands,
finishing agents of value US$ 65 thousands and mineral ceramics of value US $ 33 million in 2010. The average applied MFN duties imposed products by India on these 12%,
were
about
however Indian average applied SAFTA preferential duties on the same product lines are about 8.4%. For further details regarding Pakistans potential export of miscellaneous chemicals to India along with average applied MFN duties and SAFTA duties are given in Annexure XVI. About 86.6% of Pakistans total export of miscellaneous chemicals to India constitutes of Insecticides, 7.8% constitutes of Chemicals for allied industry, 3.6% constitutes of finishing agents, 1.7% constitutes of activated natural mineral products and 0.2% constitutes of additives for ceramics etc. Pakistan has an unexplored export potential of about US$ 14 million of miscellaneous chemicals to India in 2010. The major items in which Pakistan has potential of export to India include chemical for allied industry, insecticides, finishing agents used in textile industry, herbicides, finishing agents or dye for leather industry, additives for ceramics etc. b) Pakistans Imports from India Pakistan imports only 30 tariff lines of miscellaneous chemicals from India of value US$ 50 million, which accounts about 9.2% of Pakistan total imports of miscellaneous chemicals in 2010. The major items of miscellaneous chemicals, which Pakistan imports from India includes mixed alkyl benzenes (28%), herbicides (24%), chemical for allied industry (18%), Insecticides (17%), sorbitol (4%) and finishing agents (3%). The average applied MFN duties imposed by Pakistan on these miscellaneous chemicals is about 8.1%, whereas average applied SAFTA preferential duties are about 5% for non-LDCs (India).
41
Indias exports only 2% of its global export of miscellaneous chemicals to Pakistan. Pakistan fulfils about 30% of its global demand of mixed alkyl benzenes (worth US$ 14.4 million), 21% of herbicides (worth US$ 12.1 million) and 28% of chemical for allied industry (worth US$9 million etc) from India. India has an unexplored export
potential of about US$ 41 million worth of miscellaneous chemical export to Pakistan. These chemical faces average applied ad-valorem tariff of about 9.9%. The major lines items in which India has potential in Pakistani market includes, chemical for allied industries, insecticides, herbicides, mixed alkyl-benzenes, lubricating oil additives, industrial fats/acids, laboratory reagents, finishing agents and anti-oxidants preparations etc. For further details regarding Indias export potential of miscellaneous chemicals to Pakistan and duties MFN as well as SAFTA were described in Annexure XVII. c) Indian Import Policy Conditions & Requirements for Miscellaneous Chemicals Import of 11 tariff lines of miscellaneous chemicals are prohibited in India. While import of 33 tariff lines is allowed only if registered and not prohibited for import under Insecticides Act, 1968 and formulations thereof. Import of mixture of alkyl derivatives of acyclic hydrocarbons is restricted in terms of Interim of Rotterdam Convention on Prior Informed Consent (PIC) procedure for hazardous chemicals and pesticides. Whereas another three tariff lines of alcohol which is directly potable or can be used for making potable alcohol is however, not permitted to be imported by India.
42
No. I II Restricted
Indian Import Policy Regulations
No. of Tariff Lines 11 33
If registered and not prohibited for import under Insecticides Act, 1968 and formulations thereof
III
Import is restricted in terms of Interim PIC Procedure of Rotterdam Convention on Prior Informed Consent procedure for hazardous chemicals and pesticides
IV
Subject to conditions as specified in public notice issue in this behalf
The import of any alcohol which is directly potable or can be used for making potable alcohol is however, not permitted Total
51
Source: Ministry of Commerce India 6. 6.1 Policies and Procedure for Chemical Industry Indian National Chemical Policy Initiatives13
In mid 1980s India has granted, fiscal concessions to small scale chemical sector for the establishment of a large number of units in the Small Scale Industries (SSI) sector. Envisaging chemical sector as a key driver of economic growth, employment opportunity and development, India has initiated/formulated a National chemical Policy 2012 to facilitate its chemical industry. The thrust of this policy is to underscore the imperative that sustained adoption of technology up-gradation would offer viable options in overcoming developmental challenges across multiple sectors. In Indian National Chemical Policy (NCP-2012) India has focused on nine aims and objective in the formulation of Indian chemical policy. First, to attract & increase investment by facilitating industry with capacity additions, ensuring availability of feedstock, and quality infrastructure. Second, increase the domestic demand and per capita consumption of chemicals by creating a conducive environment, for serving domestic demand through production as well as leveraging
13
Ministry of Chemicals India
43
the significant export potential in segments like pharmaceuticals, agrochemicals, dyestuffs & specialty chemicals. Third, in the policy India has initiated adaptation of cluster approach in chemical sector to encourage and for development of ancillary industries around them. Fourth, facilitate the industry with latest technologies, up-gradation of existing technology and substitution of the outdated technology. Fifth, promote R&D focusing green technologies. Sixth, promote skill development of human resource engaged in the chemical industry. Seventh, establishment of Chemical Standard Development Organization (CSDO) for the growth, development, high quality and competitive chemical sector to meet international standards/norms and their enforcement; Eighth, set up of National Chemical Center (NCC) for the promotion of an integrated and holistic growth & development in the chemical industry and ninth, put in place robust framework for a disaster resistant and resilient chemical sector in India. Investment Policy; In the chemical sector, 100% FDI is permissible under automatic route and entrepreneurs need to submit only IEM (Industrial entrepreneurs Memorandum) with the Department of Industrial Policy & Promotion to set up chemical manufacturing unit in the country. Licensing Policy; In India manufacture of most chemical products inter-alia covering organic/inorganic chemicals, dyestuffs and pesticides is de-licensed. However, India has imposed compulsory import licensing policy on certain chemicals because of their hazardous nature is as follows; Hydrocyanic acid & its derivatives, Phosgene & its derivatives and Isocynates & di-isocynates of hydrocarbons. Custom duty; The basic customs duty on most chemical feed-stocks is 2.5% in India. Import Duty; Import duty on most of the chemical products is at 7.5% ad valorem in India. Excise Duty; In general, the central excise duty rate for chemical sector is about 10% in India. Although the chemical industry has been witnessing the customs duty reduction regime during the last decade, yet the incidence of taxes, viz. central excise and value added tax (VAT) continues to be relatively higher as compared to many Asian countries.
44
7.
Trade defense laws/Regulations for Chemicals Industry
The global chemical sector is one of the sectors which faces significant challenges domestically and internationally such as Non-Tariff Measures (NTMs), Non-Tariff Barriers (NTBS), antidumping, and subsidies etc. In addition to above mentioned trade defense measures, the global chemical industry faces further challenges like lack of finances in research & development, lack of eco-friendly technologies/systems, legal bindings to international conventions, green peace protocol, accreditation to certifications, patent registration, laboratory accreditations, maintaining quality/standards, licensing, proper product handling, safety
measures, labeling, etc were used as defensive measures by certain countries to protect their domestic industry on the grounds of above protocols. 7.1 Indian Regulations & Documentation Requirement in Chemical Sector14:
As discussed earlier, chapter-wise specific regulation imposed by India on the import of chemicals such as quantitative restrictions and import of chemicals under the obligation of international convention; India has also enforced the following regulations & documentation requirement for the import, exports and investment in chemical sector. Advance authorization application from industry for import of raw material against the export of petrochemical items. Applications for import of items covered under restricted list of import. Approval from the petrochemical industrial for the issuance of import certificate for chemicals, plant & machinery etc. Issuance of consent certificate for import/export of chemicals covered under Rotterdam Convention Issuance of complete application along with end-use certificate for import/export of Chemicals, Organisms, Materials, Equipment and Technologies SCOMET Items
14
Ministry of Chemicals & Petrochemicals India
45
Copy of earlier approval from Central Insecticides Board CIB & Registration Committee for export of pesticides and application request from petrochemical industry for issue of End User Certificate. End-use Certificate for Non-Insecticidal application in respect of chemical industry for chemicals appended to the Insecticides Act India has imposed quantitative restrictions on the import of chemicals for few chemicals which are covered under the obligations as per International Conventions. The detail regulations and documentation requirement is mentioned in Annexure XVIII. (a) Indian NTBs on Pakistani chemicals15 The strong demand for certain Pakistani chemicals, particularly soda ash in Indian market also became a victim of protective trade barriers of Indian authorities looking for excuse to discourage imports from Pakistan. The Indian authorities have recently announced to impose anti-dumping duty on imports of soda ash from Pakistan. The Indian authorities are also delaying the renewal of certification by Bureau of Indian Standards (BIS) for import of cement from Pakistan. India has imposed an anti-dumping duty of up to USD 38.79 per ton on certain chemicals such as soda ash, used mainly in detergents, imported from seven places including China, EU, Pakistan and the US, to protect domestic players against cheaper imports16. (b) NTBs Product-Wise: Likewise Pakistan didnt impose any NTBs on chemical originating from India, whereas many countries filed NTBs against products originating from India. The products on which NTBs filed against Indian chemicals by other countries includes requisition of registration
15
http://www.defence.pk/forums/economy-development/86527-india-blocks-chemicals-importpakistan.html#ixzz22NJfFrIM
16
http://www.eximguru.com/Export-Import-News/News/News.aspx?Id=9980&Tag=anti-dumpingduty&GridInfo=anti+dumping+duty+Export+Import+News01_Latest+Export+Import+News09
46
certification, a permission for importation, REACH certification (registration/testing & certification), immigration issues and Non harmonized maximum residue limit (MRL) imposed by EU, attestation of documents required by UAE which is costly /time consuming, prior approval required by Korea, compulsory certification i.e. (a) Certificate of acceptance of foreign certification by Derzh Standard or (b) Conformance certificate required, ISO 9000 standards adopted by Derzh Standard on production systems and foreign certification recognition only to the extent of international treaty are obligations of Ukraine and a fixed commission of 5% of the value of the total import on Indian chemicals imposed by Syria. For detailed chemical NTBs files on India Products, originated from India by multiple countries see annexure XIX; 8. Revealed Comparative Advantages (RCA) in Chemical Sector
In order to study the comparative advantages in chemical sector by both countries (Pakistan & India) a revealed comparative advantage indices was performed for the last three years at HS 6 digit level. The RCA will give us an indication of how much a country (Pakistan or India) is exporting a given good relative to how much the world is exporting that same good. A country is said to have a revealed comparative advantage when its share of export of a given good/product exceeds the equivalent share of export of the world. This is captured when the numerator is bigger than the denominator, or equivalently when the RCA is above 1, meaning that a given country exports, proportionally to its total exports, more than the share of exports of the world in that given product. An RCA below 1 indicates that a country does not have a revealed comparative advantage in a given good or equivalently that the world share of that given product is higher than that of the country under analysis. From the analysis of revealed comparative advantage (RCA), the following results have been interpreted for both the countries based on the export statistics of 2010 at HS 6 digit level; Inorganic Chemicals (HS-28): In inorganic chemicals Pakistan have revealed comparative advantage greater than 1 only in 8 tariff lines, whereas India in inorganic chemicals have revealed comparative advantage greater than 1 in 46 tariff lines in 2010. Pakistan have highest RCA of about 16 in Hydrogen Chloride (HCL), whereas India have highest RCA of about 13 in Dithionites and sulphoxylates of metal.
47
Organic Chemical (HS-29): Similarly in organic chemical Pakistan have comparative advantage greater than 1 in 6 tariff lines, whereas India have revealed comparative advantage greater than 1 in 148 tariff lines. Pakistan has highest RCA of about 10.2 in ethylene dichloride, whereas India have highest RCA of about 53.6 in Organic compounds nes. Fertilizers (HS-31): In fertilizers Pakistan and India both have revealed comparative advantage (RCA) less than 0, which infer that both countries are not even competitive to export fertilizer to world. Tanning & Dyeing Chemicals (HS-32): Similarly in tanning & dyeing chemicals Pakistan have revealed comparative advantage greater than 1 only in three tariff lines, while India have RCA greater than 1 in 20 tariff lines. Pakistan has a highest RCA (of about 1.7) in Pigments and preparations based on chromium compounds, whereas India have highest RCA (of about 13.3) in Ultramarine and preparations. Essential Oils and Resinoids (HS-33): Whereas in essential oils and resinoids Pakistan have low revealed comparative advantage less than 1, while on the other hand India have comparative advantage greater than 1 in 8 tariff lines. India have highest RCA (of about 23.6) in Essential oils of other mints (HS-330125). Soap/Detergents (HS-34): In soaps and detergents Pakistan have comparative advantage greater than 1 in only two tariff lines i.e. Soaps & organic Surface preperations
(RCA=3.7) and toilet soap (RCA=2.8). similarly on the other hand India have RCA greater than 1 in only three tariff lines i.e. Anionic surface-active agents (RCA=2.3), Polishes, creams & similar preparations for footwear or leather (RCA=1.3) and Organic surface-active agents, nes (RCA=1.03) Albuminoidal Substances (HS-35): Pakistan have revealed comparative advantage greater than 1 in only one tariff lines i.e. Gelatin and gelatin derivs (RCA=4.1), whereas on the other hand India have comparative advantage greater than 1 in three tariff lines i.e. Casein (RCA=4.6), Gelatin and gelatin derivs; (RCA=2.7) and Egg albumin, dried (RCA=2.2).
48
Explosives Chemicals (HS-36): However exports of explosive chemicals are banned in both countries but both countries have revealed comparative advantage greater than 1 only in product that is matches export. In matches, Pakistan has RCA about 16 as compared to India, who have RCA matches for about 13.14. The RCA results infer that Pakistan have highest comparative advantage in match export to world than India. Photographic Chemicals (HS-37): In photographic chemicals, the RCA analysis at HS6 digit level infers that Pakistan have RCA lower than 1 in all the products exported by it under photographic to world in 2010, Whereas India have revealed comparative advantage greater than 1 in 3 tariff lines in export of photographic chemicals i.e. Cinematograph film (RCA=3.1), Cinematograph film, exposed & developed, of a width of 35 mm or more (RCA=3.08), Photo film nes in rolls (RCA=1.5). Miscellaneous Chemicals (HS-38): Similarly in Miscellaneous chemicals exports, Pakistan have revealed comparative advantage less than 1, whereas India have comparative advantage greater than 1 in 18 tariff lines in 2010. India have highest revealed comparative advantage in product such as Rodenticides and other plant protection products (RCA=15.3). 9. SWOT Analysis of Pakistans Chemical Sector:
Strengths: Pakistan has only developed its basic industries, consisting of refineries, fertilizers, cement, sugar, polyester fibers and some other petrochemical based polymer industries, to fulfill local demand. Pakistan have a large potential in production of basic inorganic chemicals like Soda Ash, Caustic Soda, Sulphuric Acid & Chlorine at a low price to cater the needs of the local industry but also surplus is being exported to India and rest of the world. Pakistan had a high potential to produced raw organic chemicals such include Pure Terephthalic Acid (PTA), BTX and carbon black at low rates through natural gas and coal.
49
Abundantly available raw materials for inorganic chemicals in the country at low rates, which can enhance Pakistans competitiveness and comparativeness in production of caustic soda, soda ash and chlorine Weakness: In organic chemicals investors show low interest in the production of Naphtha cracker due to the reasons like highly cost intensive project, sophisticated technology involved, export market limitations, insufficient current tariff spread Pakistan has not been able to create its own capability for technological and engineering infrastructure for the exploitation and commercialization of local or imported technologies. Domestic production of consumer goods is based on labour intensive, low value-added products In Pakistan, R&D institutions, universities and industry work in isolation and are completely divorced from each others activities. Low capacity of world scale basic petrochemical production facilities in Pakistan. Complexity and low level of the technology involved in the chemicals production in Pakistan. High level of capital outlay required for the organic and inorganic chemical production, so thats why industry needs foreign investment. Highly cost Intensive project, market size limitations vis--vis world scale plants, no sophisticated technology involved and insufficient current tariff spread are also main reason for the growth and production of organic and inorganic chemicals. The Caustic Soda manufacturing produces chlorine as a by-product which has limited usage in the country. Only Engro Polymers is utilizing chlorine for the manufacture of value added products i.e. PVC. High cost of energy, non availability of natural gas and electricity hinders the production capacity of the chemical industry. High freight cost to export surplus capacity of chemical products.
50
Reliance on foreign engineering and construction companies for the commercialization of locally developed or imported technologies. Imports of second-hand highly energy intensive plants based on antiquated technologies. Reliance on the development of resource based, low technology, labour intensive products for export. High prices of basic feed stock: Basic raw materials constitute major portion of cost of production (30% to 60%) in the chemical industry. Pakistans chemical industry eit her uses natural gas or crude oil as feedstock for manufacturing process. The fluctuations in oil prices therefore affect the growth projections of the firms. Fragmented nature of industry: The chemical industry is having a fragmented structure with more number of units in small-scale sectors spread in various parts of the country. The installed capacities in most of the small-scale units are smaller as compared to global scales. Low R&D levels: The level of R&D investments in the chemical sector is low at around 0.3% of total sales. The areas for strengthening of R&D in chemical industry include improvements in manufacturing process for reduction in cost of production, application development to diversify demand, and new product development. Opportunities Pakistan can utilize alternative resources such as natural gas availability, Thar coal reserves and import of cheap natural gas from Iran, to produce basic petrochemical building blocks (Naphtha cracker) from; gasification of coal, dehydrogenation of associated gases and cracking of natural gas. This opportunity surely opens the gateway for the development of Petrochemical industry in Pakistan, which will support the local chemical & allied products industries in meeting their raw materials requirements and to save the valuable foreign exchange.
51
Pakistan has surplus capacity of caustic soda available in the country, which need proper marketing and industry to export. While in the production of caustic soda; a large quantity of chlorine is produced as a byproduct which is used in the production of PVC pipes, if proper marketing opportunities and handling procedure is provided, a large amount foreign exchequers can be earned by Pakistan through this sector. Threats: Domestic production of chemicals hampered because of competition from other countries, which have flooded the Pakistani market with cheap and better quality products, especially in the fields of construction materials and household consumer goods. Consumption of organic chemical as a raw material for the industry in Pakistan is reached at a sizeable level due to hike in the prices of petroleum A high import of organic and inorganic chemical products from abroad is a threat for the domestic chemical industry growth and production. Dumping of Caustic Soda in the country results in the closure of the industry and loss of foreign exchange and revenue.
52
10.
CONCLUSION
It is a general perception among the political leaders and policy makers that Pakistan should grant MFN status to India. This would provide Pakistan a political mileage but before granting this privilege, Pakistan would need to raise more substantive issues notably Indian non-tariff barriers, subsidies and protective tariffs particularly in the chemical sector. Pakistan has almost granting something close to de facto MFN status to India in the recent past, considering composition of both formal and informal trade. In conclusion, there is a much to be gained from liberalizing trade in chemical sector between India and Pakistan but the trade in this sector is in favor of India. Pakistan export only 36 tariff lines of chemical at HS-6 digit level to India, which accounts about US$ 39.7 million, whereas on the other hand India exports 325 tariff lines of chemicals to Pakistan of worth US$ 379 million. For sustained and high gains from bilateral trade liberalization in chemical sector requires free movement of goods, capital, investment and people etc. To keep on building this momentum both countries particularly Pakistan should negotiate for the level playing fields in the area of chemical sector where the Indian government provides subsidies, concessions, special incentives, international obligations and non-tariff barriers to promote and protect its industry. For example, Indian government provides duty protection to its domestic manufacturers of organic chemicals (phenol), Nutrient based subsidy scheme for fertilizer industry as well as import of 250 tariff lines of chemicals are permitted subject to SPS regulations, BIS certifications and provision of international protocol (Montreal protocol), CITES and multiple Indian cosmetic, drug acts registration and certification etc. In recent negative list, Pakistan has included only 65 tariff lines of chemicals items in banned list, while India under SAFTA has placed 31 tariffs lines in sensitive list for Pakistan. India in order to discourage imports of chemical from Pakistans has imposed BIS certification regulation on Pakistans cement exports and anti-dumping duty on soda ash, which are Pakistans potential export to India. Besides above restrictions, both India and Pakistan through negotiations need to tackle their restrictive visa regime, particularly single point entry and exit of businessman, police reporting. Additionally there requires reforms in policies of both countries in regulations of cross border trade particularly for logistic service providers such as trucks and railways etc. These issues prohibits free trade in goods, without free movement of people and investment runs the risk of creating trade monopolies, which would result in suboptimal gains from the expansion of bilateral trade between both countries.
53
11.
RECOMMENDATIONS
Due to absence of clear policy framework on the development of chemical sector with
any road map and benchmarks has resulted into growth, which has been haphazard and on shortterm need basis. The chemical sector has no benchmarks at this moment in terms of its total productive capacity, sales turnover, contributes to GDP and taxes, manpower employed, value addition benchmarks in comparison to global trends and other indicators of the sector. Although the Engineering Development Board and the chemical industry has published Chemical Vision 2030, a chemical policy so that the chemical industry could own the vision and play its due role in the implementation process of these policies. Based on the assumption through desk research on chemical sector, the following recommendations have been suggested to further strengthen the chemical sector. i) Pakistan needs to create its own capability and achieve self-reliance in project design, engineering and the construction management required for the commercialization of technologies through joint ventures. ii) There is a need to enhance and develop chemical industry capability in the production of medium and high technology based chemicals for export, alongside to the present industrial structure based on low technology resource based products. iii) Government should provide suitable incentives to entrepreneurs for the development of an export-oriented chemical industry. iv) Industrial Policy for Chemical Sector: A comprehensive and consistent industrial chemical vision and policy is necessary for a period of at least next 20 25 years e.g as is the case of India. The consistency of this policy needs to be ensured over its life. v) Monitoring and Implementation Mechanism: The progress on implementation of various visions and policies needs to be monitored periodically and at the highest level in the country and change made if parameters change. vi) Infrastructure: The existing infrastructure at Port Qasim, EPZs, Special and other Industrial Zones needs to be made self sufficient as far as requirement of power, gas,
54
water and other relevant offsite facilities such as, waste water treatment etc are concerned. The government therefore, must increase spending on the infrastructure projects. Creation of such infrastructure facilities by the government shall reduce the project cost and enhance their viability. The prospects of setting up industrial zones along motorway should be seriously examined. vii) Technology Up-gradation Develop technological base through local research and development. Design and build strong industrial and engineering base through setting up design and engineering institutes so that they can provide local engineering industry with the engineering fabrication drawings. Foreign designing and engineering firms may be asked to provide fabrication drawings of all the plants and machinery. A technology development fund may be created to encourage local scientists and researchers for carrying out the R&D work. Scientists and Researchers should be offered market based salaries. Any restriction for obtaining foreign technology may be completely done away with. viii) Cost of Utilities Presently, the cheaper feed gas to the fertilizer industry is being cross subsidized by the industrial and commercial consumers. The development surcharge collected from gas producing fields is taken in the consolidated government funds. This surcharge should be used to promote chemical industry where special natural gas is the raw material.This upfront cost of providing power, water and natural gas should be borne by the government to partially offset the high capital cost of setting up projects in Pakistan.
55
ix)
Human Resource Development: Specialized courses within the discipline of chemical technology and chemical engineering were need to designed in consultation with the subsectors of the Chemical Industry like pesticides, Dyes and Pigments, Paints and Varnishes, Paper & Paper Board and Glass etc.
x)
Development Fund: The government should develop a set up of a special development fund for the Petrochemical and Chemical Industry to provide loans on easy terms.
xi)
Financial Health of Existing Industrial Investors: The good financial health of existing industrial investors is a big motivation for the potential investors. The government should identify the sectors of the industries which are operating below capacity utilization and offer them special incentives to operate to the 100% capacity in order to have low cost of production.
xii)
Quality Control and Environment Standards: The private sector may be encouraged to come forward in various sectors to implement ISO standards and product specifications by Pakistan Standards and Quality Control Authority (PS&QCA). This shall re-enforce implementation of standards besides creating employment. Government should encourage chemical industries to get ISO 14000 certification by making it mandatory for all units.
xiii) Incentives for value addition of intermediate by products being exported The Sugar Industry has big potential of value addition through conversion of molasses to alcohol and ultimately to ethylene and Polyethylene or production of gasohol (gasoline + 20% ethanol). Naphtha a byproduct from the refineries is presently being exported. Its value addition to produce Petrochemicals need governments support and incentives. Local caustic soda is very expensive as compared to international market because of charging all cost of chlorine which is being wasted. Its appropriate utilization shall reduce
56
cost of caustic soda which is a raw material / intermediate raw material for a number of industries. xiv) Establishment of Chemical Clusters Specialty chemicals are small projects with very high value addition. Government should identify locations and provide all infrastructure, good residential, recreational facilities & utility facilities to develop this area and encourage investors. If a Petrochemical is to be based on associated gas containing ethane, Potohar appears to be a good location. If we decide to follow the molasses route, a place in Sindh or Punjab where large number of sugar mills are located may be ideal. xv) Re-location of Plants Government should need to offer incentives for the re-location of chemical plants after thorough survey of outmoded technology / residual life. Provincial Governments should need to devise a set up for special fund to develop infrastructure for exploration and utilization of local minerals like iron ore, phosphate rock and manganese ore etc. Government may set up committees for revival of closed down / sick units of chemical industry and submit recommendations. Government should need to allocate up to 10% of natural gas for setting up of industries where basic raw material is natural gas like petrochemical complex based on production of ethylene / polyethylene from associated gases. Government may consider special gas fields to dedicate for chemical industries. Gas may be priced equivalent to competing Middle East, Gulf countries & Saudi Arabia. A strong database of various technologies and technology providers may be developed for Chemical Industries. Cascading of tariff should continue for industrial growth in the country.
57
Annexure I:
Pakistans Negative List of Banned Chemical Items from India (2012) Sector HS-Code 28030010 28030020 28030090 Inorganic Chemicals (8 Tariff Lines) 28070000 28151100 28151200 28362000 28363000 29054400 29054500 29054900 29152100 29153100 29153300 29153600 29163600 29163910 29163990 Albuminoidal Substances (4 Tariff Lines) 29242910 29334990 29349910 29349990 29350040 29350050 29350060 29394100 29394200 29394300 29394900 29396900 29411000 Description Carbon black (rubber grade) Carbon black (other than rubber grade) - Other Sulphuric acid; oleum Solid In aqueous solution (soda lye or liquid soda) Disodium carbonate -Sodium hydrogencarbonate (Sodium bicarbonate) - - D-glucitol (sorbitol) - - Glycerol - - Other - - Acetic acid - - Ethyl acetate - - n -Butyl acetate - - Dinoseb (ISO) acetate - - Binapacryl (ISO) - - - Ibuprofen - - - Other - - - Paracetamol - - - Other - - - Furazolidone - - - Other - - - Sulphamethexazole - - - Sulpha-thiazolediazine - - - Sulphanilamide - - Ephedrine and its salts - - Pseudoephedrine (INN) and its salts - - Cathine (INN) and its salts - - Other - - Other -Penicillins and their derivatives with a penicillanic CD% 25 25 25 10 20 Rs.4000/MT 10 20 20 20 20 25 25 25 20 10 20 10 25 5 25 5 25 25 25 25 25 20 20 10 acid
58
29413000 29414000 29415000 29419010 29419040 29419050 29419060 29419090 32064910 32064920 32064930 Tanning & Dyeing Chemicals (8 Tariff Lines) 32065090 32110010 32149010 32149090 32151190 33030010 Essential Oils & Resinoids (4 Tariff Lines) Soaps, organic surfaceactives agents (3 Tariff Lines) Albuminoidal Substances (4 Tariff Lines) Photographic Chemicals (2 Tariff Lines) 33030020 33030090 33061010 34011100 34011900 34029000 35052010 35052020 35052090 35061000 37013030 37013090 38021000 Miscellaneous Chemicals (5 Tariff Lines) 38029000 38061090 38099200 38237000
-Tetracyclines and their derivatives; salts thereof -Chloramphenicol and its derivatives salts thereof -Erythromycin and its derivatives; salts thereof - - - Cephalexin - - - Cephradine oral - - - Ingredients for pesticides - - - Cefixime in bulk - - - Other - - - Master batches (coloured) Pigments and peparations based on cadmium - - - Pigments and preparations based on - - - Inorganic products of a kind used as luminophores - - - For leather - - - Silicon sealant - - - Other - - - Other - - - Eau-de-cologne - - - Perfumes - - - Other - - - Tooth paste - - For toilet use (including medicated products) - - Other -Other - - - Starch based glues - - - Dextrin based glues - - - Other -Products suitable for use as glues or adhesives, put - - - Presensitized printing plates - - - Other -Activated carbon -Other - - - Other - - Of a kind used in the paper or like industries -Industrial fatty alcohols
10 10 10 20 20 5 15 10 15 15 15 15 10 10 20 20 35 35 35 35 35 35 25 20 20 20 up for 15 20 10 10 10 15 15
59
Annexure-II
Pakistans Export of Top ten Organic Chemicals Potential in Indian Market in 2010 (US$ 000) Product code Product Label Pakistan's exports to world Pakistan's exports to India India's imports from world Indicative potential trade Indian MFN rates % India SAFTA Preferenti al Tariffs rate% for Pakistan Grand Total 291736 290315 291735 291732 290531 292610 290339 Terephthalic acid and its salts ethylene dichloride Phthalic anhydride Dioctyl orthophthalates Ethylene glycol (ethanediol) Acrylonitrile Fluorinated, brominated ,acyclic hydrocarbon 291612 291533 294190 Acrylic acid esters N-butyl acetate Antibiotics nes 187 102 91 0 0 2 190165 31218 330643 187 102 89 10 10 10 8 8 8 41910 17865 17718 1699 1657 886 750 321 25742 10843 12282 1533 111 88 750 0 9444510 488171 118315 55417 1478 512154 126178 30089 15988 7022 5436 166 1367 798 0 321 10 10 10 10 10 10 10 10 7.76 8 6.8 8 8 8 8 6.8
Source: Trade Map Authors Own Calculations Annexure III

Indias Export potential of Organic Chemicals to Pakistan in 2010 (US$ 000) Product Code Product Label Pakistan's imports from world Grand Total 290243 294190 293499 290531 290511 293339 292690 P-xylene Antibiotics nes, in bulk Nucleic acids and their salts, Ethylene glycol (ethanediol) Methanol (methyl alcohol) Heterocyclic compds cntg pyridine Nitrile-function compounds, nes 1721101 353571 54702 46303 234387 27532 26981 50057 Pakistan's imports from India 260666 127622 4526 13483 39 0 6631 2909 8586928 426443 380496 65557 22944 21792 124051 22540 India's exports to world Indicative potential trade Potential 798400 225949 50176 32820 22905 21792 20350 19631 Average MFN Applied by Pakistan% 6.3 5 11.4 11.6 0 5 8.3 5 5 5 5 N/A 5 5 Pakistan SAFTA rates%
60
292249 292429 291612 293299
Amino-acids nes, and their esters; Cyclic amides and their derivatives, Acrylic acid esters Heterocyclic compounds with oxygen
20028 21657 20860 16473
1763 4014 0 3054
22892 31467 14782 22044
18265 17643 14782 13419
5 9 5 5
5 N/A 5 5
Source: Trade Map
Annexure IV
Pakistans Export Potential of In-Organic Chemical to India in 2010 Product code Product Label Pakistan's exports to world Pakistan's exports to India India's imports from world Indicative potential trade (US$ 000) Indian MFN rates India SAFTA Preferential Tariffs rate% for Pakistan Grand Total 283620 280610 282720 283919 284700 282911 281700 Disodium carbonate hydrochloric acid Calcium chloride Silicates of sodium Hydrogen peroxide Sodium chlorate Zinc oxide; zinc peroxide 280300 283630 Carbon Black sodium bicarbonate 382 366 1 67 78765 4336 381 299 5 10 5 6.5 29961 13117 5517 2837 2200 2148 835 547 11358 9379 0 0 0 1701 0 0 2834190 83523 621 1382 2093 8160 11616 5633 11831 3738 621 1382 2093 447 835 547 10 10 10 10 10 10 10 10 6.5 6.5 6.5 6.5 6.5 6.5 6.5 Sensitive list
Source: Trade Map (Authors own Calculations) Annexure V

Indias top ten potential Inorganic chemical exports to Pakistan in 2010 (US$ 000) Product Code Product Label Pakistan's imports from world Pakistan's imports from India India's exports to world Indicative potential trade Potential Average MFN Applied Tariff by Pakistan Grand Total 423654 8902 2313918 108477 6.0 Pakistans SFTA preferential rates
61
283329 282300 283110
Sulphates of metal nes Titanium oxides Dithionites and sulphoxylates of sodium
10049 9059 9671
86 0 1832
37162 43973 15040
9963 9059 7839
7 5 5
5 5 5
280920
Phosphoric acid & polyphosphoric acids
238210
7328
7328
281122 280300
Silicon dioxide Carbon (carbon blacks and other forms of carbon, nes)
5756 5010
0 0
9793 268746
5756 5010
5 20
5 N/A
283620 283319 284130 282110 283329
Disodium carbonate Sodium sulphates nes Sodium dichromate Iron oxides and hydroxides Sulphates of metal nes
4485 3303 4261 4052 10049
5 0 32 35 86
51774 5141 3266 3268 37162
4480 3303 3234 3233 9963
10 10 5 7.5 7
N/A 5 5 5 5
Source: Trade Map Annexure VI

Indias Potential Export of Fertilizers to Pakistan in 2010 (US$ 000) Product Code Product Label Pakistan's imports from world Sum of Pakistan's imports from India Sum of India's exports to world Sum of Indicative potential trade Potential Average MFN Applied by Pakistan to India% Grand Total 310590 310210 310530 310420 310520 Fertilizers nes, Urea, wthr/nt in aqueous solution Diammonium phosphate, in packages Potassium chloride, in packages weighing Fertilizers cntg nitrogen, phosphorus & potassium 310230 310221 310430 310229 Ammonium nitrate, Ammonium sulphate, in packages Potassium sulphate, in packages Ammonium sulphate/nitrate mixtures/ 1749 1349 16745 935 55 0 0 0 4289 1726 1259 465 1694 1349 1259 465 0 0 0 0 5 5 5 5 648402 13007 239345 313922 3017 3177 1154 407 0 0 25 204 39901 5943 4588 3151 8661 7978 24414 5536 4588 3151 2992 2973 0 0 0 0 0 0 5 5 5 5 5 5 SAFTA preferential Tariff Rates
62
310100 310540
Animal or vegetable fertilizers, in packages Monoammonium phosphate&mx
166 38258
27 0
1249 122
139 122
5 0
5 5
Source: Trade Map
Annexure VII
Pakistans Export Potential of top ten Paints & Dyeing chemicals in 2010 (US$ 000) Product code Product Label Pakistan's exports to world Pakistan's exports to India India's imports from world Indicative potential trade Indian MFN rates % India SAFTA Preferent ial Tariffs rate% for Pakistan Grand Total 320890 Paints & varnish based on polymers 320910 Paints& varnishes of acrylic/vinyl poly, 320416 Reactive dyes and preparations 320810 Paints & varnishes based on polyesters, 320417 Synthetic organic pigments 2570 4 58175 2566 10 Sensitive list 320649 Inorganic coloring matter 1011 0 40116 1011 10 Sensitive list 320620 321519 320611 321410 320420 Pigments and preparations Printing ink, nes Titanium pigments Mastics; painters' fillings Synthetic organic 607 572 425 372 342 0 0 0 0 28 813 66843 200588 18734 11861 607 572 425 372 314 10 10 10 10 10 8 8 8 8 8 2653 1 12189 2652 10 2701 7 22357 2694 10 Sensitive List 8 2919 0 7738 2919 10 8 28400 12927 40 0 920519 51063 28227 12927 10 8
Source: Trade Map Authors own calculations
63
Annexure VIII
Indias Export Potential of Tanning & Dyeing Chemicals to Pakistan in 2010 (US$ 000) Product Code Product Label Pakistan's imports from world Pakistan's imports from India India's exports to world Indicative potential trade Potential Average of MFN Tariff Applied by Pakistan Grand Total 320417 320416 320412 320419 321290 321519 320420 Synthetic organic pigments & preparations Reactive dyes and preparations Acid and mordant dyes and preparations Synthetic organic colourg matter nes, Pigment dspr in a n-aqueous media Printing ink, nes Synthetic organic products used as fluorescent brightening agents 320414 320210 320415 320411 Direct dyes and preparations Synthetic organic tanning substances Vat dyes and preparations Disperse dyes and preparations 2149 15696 32266 12853 834 2794 871 942 52493 41762 37419 31812 1315 12902 31395 11911 15 5 2.5 10 N/A 5 5 N/A 315993 25186 56722 11587 11993 2844 7724 5082 41971 3985 18520 5925 195 3 0 574 1611794 435145 251487 186113 111053 101414 58477 53911 216518 21201 38202 5662 11798 2841 7724 4508 12.80909 15 15 15 5 15 17 20 N/A N/A N/A 5 5 N/A N/A Pakistans SAFTA Preferential Tariff
Source: Trade Map (Authors own calculation) Annexure IX

Pakistans Export Potential of Essential Oils in 2010 (US$ 000) Product code Product Label Pakistan's exports to world Pakistan's exports to India India's imports from world Indicative potential trade Indian MFN rates % India SAFTA Preferential Tariffs rate% for Pakistan Grand Total 330499 Beauty or make-up preparations nes 330420 330590 Eye make-up preparations Hair preparations, nes 1107 1086 19 0 4542 16258 1088 1086 10 10 Sensitive list Sensitive list 10227 3021 19 0 307348 41951 9873 3021 10 Sensitive list
64
330300 330510 330290 330610 330720
Perfumes and toilet waters Hair shampoos Mixtures of odoriferous subst Dentifrices Personal deodorants & antiperspirants
935 680 497 463 435
0 0 0 0 0
33941 8305 37236 4997 35376
935 680 497 463 435
10 10 10 10 10
Sensitive list Sensitive list 8 Sensitive list Sensitive list
330530 330113
Hair lacquers Essential oils of lemon
408 407
0 0
73 2547
73 407
10 30
N/A11.6
Source: Trade map (Authors own Calculations) Annexure X

Indias Export Potential of Essential oils to Pakistan in 2010 (US$ 000) Product Code Product Label Pakistan's imports from world Pakistan's imports from India India's exports to world Indicative potential trade Potential Average MFN Tariff Applied by Pakistan to India Grand Total 330290 Mixtures of odoriferous subst use as raw materials in industry 330510 330210 Hair shampoos Mixtures of odoriferous substances for the food or drink industries 330499 Beauty or make-up preparations nes; sunscreen or sun tan preparations 330590 330720 330300 330749 Hair preparations, nes Personal deodorants & antiperspirants Perfumes and toilet waters Room perfuming or deodorizing preparations 330491 330119 330420 Powders, skin care, Essential oils of citrus fruits, nes Eye make-up preparations 1392 1351 1626 0 0 0 13629 5398 1188 1392 1351 1188 35 10 35 5 5 5 3306 2523 2056 1495 8 0 372 0 62026 5575 80668 5505 3298 2523 1684 1495 35 35 35 35 N/A 5 5 5 5622 0 109494 5622 35 N/A 20592 16683 0 25 24165 16519 20592 16494 35 10 5 5 90518 28447 3238 2580 900579 105945 85915 25867 28 10 5 5 Pakistans SAFTA preferential rates
Source: Trade Map

65
Annexure XI
Pakistan Export Potential of Soap & detergents to India in 2010 (US$ 000) Product code Product Label Pakistan's exports to world Pakistan's exports to India India's imports from world Indicative potential trade Indian MFN rates % India SAFTA Preferential Tariffs rate% for Pakistan Grand Total 340119 Soap&orgn surf prep,shapd,nes; 14853 7377 21 0 307058 8454 14832 7377 10 10 8 Sensitive list 340111 Toilet soap&prep,shaped; 5698 0 7771 5698 10 Sensitive List 340220 Surface-active prep, washing & cleaning 340211 340120 340490 340213 340510 Anionic surface-active agents Soap nes Artificial and prepared waxes, nes Non-ionic surface active agents Polishes, creams for footwear or leather 340130 Organic surface-active products for washing the skin, 340290 Surface-active preparations, washing and cleaning preparations, nes 119 0 26781 119 10 8 123 0 4165 123 10 8 231 216 174 170 159 7 0 0 14 0 16242 12651 29156 19354 2669 224 216 174 156 159 10 10 10 10 10 8 8 8 8 8 500 0 11998 500 10 8
Source: Trade Map (authors own calculations) Annexure XII

Indias Export Potential of Soaps & Detergents to Pakistan in 2010 (US$ 000) Product Code Product Label Pakistan's imports from world Pakistan's imports from India India's exports to world Indicative potential trade Potential Average Applied MFN rates by Pakistan Grand Total 155244 11825 322230 119646 18.4 Pakistans SAFTA preferential rates for India 5
66
340211 340213 340220 340319 340490 340290 340399 340111
Anionic surface-active agents Non-ionic surface active agents Surface-active prep, washing & cleaning Lubricating & similar prep Artificial and prepared waxes, nes Surface-active preparations, nes Lubricating preparations & similar nes Toilet soap & prep; papers & nonwovens
40783 26130 12402 8133 7710 7372 5956 5061
10022 1330 0 14 2 5 0 0
84359 38940 16201 8514 11475 24757 5368 28480
30761 24800 12402 8119 7708 7367 5368 5061
15 20 25 20 5 25 12.5 25
N/A N/A N/A 5 5 5 5 N/A
340120 340130
Soap nes Organic surface-active products & preparations for washing the skin,
3415 2337
0 0
21193 7995
3415 2337
25 22.5
N/A N/A
340219 340391
Organic surface-active agents, nes Lub/oth prep, for treat textiles, leather, furskins etc
2326 21454
159 25
13179 2061
2167 2036
10 16
5 N/A
Source: Trade Map Annexure XIII

Pakistans Export Potential of Albuminoidal Chemicals to India in 2010 (US$ 000) Product code Product Label Pakistan's exports to world Pakistan's exports to India India's imports from world Indicative potential trade Indian MFN rates % India SAFTA Preferential Tariffs rate% for Pakistan Grand Total 350300 350610 350510 Gelatin and gelatin derivs; Glues/adhesives of all kinds Dextrins and other modified starches 9312 8473 232 207 354 354 0 0 167657 5576 9489 20521 6061 5222 232 207 30 10 50 11.6 8 Sensitive List 350520 350790 350699 350691 Glues based on starches, Enzymes nes; prepared enzymes nes Glues or adhesives, prepared nes Adhesives based on rubber or plastics, 169 127 59 45 0 0 0 0 935 41370 37418 35727 169 127 59 45 30 10 10 10 11.6 8 8 Sensitive list
Source: Trade Map

67
Annexure XIV
Indias Export Potential of Albuminoidal Chemicals to Pakistan in 2010 (US$ 000) Product Code Product Label Pakistan's imports from world Pakistan's imports from India India's exports to world Indicative potential trade Potential Average Applied MFN by Pakistan Pakistans SAFTA preferential rates for India Grand Total 350790 350691 350510 350300 350699 350610 350190 350520 350110 350400 350211 Enzymes nes; prepared enzymes nes Adhesives based on rubber or plastics, nes Dextrins and other modified starches Gelatin and gelatin derivs; isinglass; Glues or adhesives, prepared nes Glues/adhesives of all kinds Casein glues; caseinates Glues based on starches, Casein Peptones & derivs; protein substances Egg albumin, dried 35254 16517 8792 2634 1292 1291 1033 1003 1463 689 296 123 371 222 17 46 0 18 0 0 0 0 59 0 232699 40437 26122 20152 50175 6692 1496 927 850 76715 1463 7258 34194 16295 8775 2588 1292 1273 1033 927 850 689 237 123 12.0 10 15 15 10 12.5 20 10 15 10 5 10 5 5 5 N/A 5 5 5 5 5 5 5 5
Source: Trade Map Annexure XV

Indias Export Potential of Photographic Chemicals to Pakistan in 2010 (US$ 000) Product Code Product Label Pakistan's imports from world Pakistan's imports from India India's exports to world Indicative potential trade Potential Average MFN Tariff Applied by Pakistan Grand Total 370790 370110 370239 370130 370610 370710 Chemical preps f photographic Photographic plates & film Photo film, nes in rolls,sensitisd, Photo plates&film in the flat, Cinematograph film, exposed & developed Sensitisd emulsions prepard for photographic 25999 2422 9421 1076 4733 186 783 146 49 13 0 0 7 60 36850 4551 910 820 249 28301 192 5001 2373 897 820 249 179 132 5.2 5 5 5 12.5 5 5 5 5 5 5 5 N/A Pakistan s SAFTA preferential rates fro India
68
370231 370210 370400 370244 370320
Color photo film Photographic film in rolls, Photo plates, film, paper, paperboard etc Film in roll, Photographic paper, paperboard & textile
265 46 41 2570 2203
0 0 0 0 0
115 42 59 37 37
115 42 41 37 37
5 5 5 5 5
5 5 5 5 5
Source: Trade Map Annexure XVI

Pakistans Export Potential of top ten Miscellaneous Chemicals to India in 2010 (US $ 000) Product code Product Label Pakistan's exports to world Pakistan's exports to India India's imports from world Indicative potential trade Indian MFN rates % India SAFTA Preferential Tariffs rate% for Pakistan Grand Total 15837 1811 2335223 14026 12 8.4
382490 380891 380991 380893 380993 382440
Chemical/allied industry preparations/prods nes Insecticides Finishing agents, use in the textile Herbicides, anti-sprouting products Finishing agents & dye for leather industry Prepared additives for ceramics, mortars, concretes
7267 3484 1950 1130 589 329
141 1572 65 0 0 3
271954 255768 36353 62524 33450 21917
7126 1912 1885 1130 589 326
10 10 10 10 10 10
8 10 8 10 8 8
380290 381700
Activated natural mineral products; Mixed alkylbenzenes & mixed alkylnaphthalenes
255 185
30 0
9238 109492
225 185
10 10
8 8
380910 381400
amylaceous subs for textile, paper, leather Organic composite solvents & thinners,
135 131
0 0
849 19238
135 131
30 10
8 8
Source: Trade Map
69
Annexure XVII
Indias Export Potential of Miscellaneous Chemicals to Pakistan in 2010 (US$ 000) Product Code Product label Pakistan's imports from world Pakistan's imports from India India's exports to world Indicative potential trade Potential Average applied MFN Tariff by Pakistan Grand Total 382490 380891 380893 381700 Chemical/allied industry preparations/ Insecticides Herbicides, anti-sprouting products Mixed alkylbenzenes and mixed alkylnaphthalenes produced by the alkyla 381121 382319 380892 382200 380991 Lubricating oil additives Industrial fatty acids, acid oils nes Fungicides Composite diagnostic or laboratory reagents Finishg agents,dye carriers&oth prep,nes,for use in the textile indust 381190 381230 Prepared additives for mineral oils Anti-oxidisg prep & other compound stabilizers for rubber or plastics 10061 5195 2 6 17805 49979 10059 5189 5 5 5 5 45286 20626 19424 40500 27484 3 1 342 278 1757 26264 47038 148886 18940 18578 26261 20625 19082 18662 16821 5 13.8 5 20 7.5 5 N/A 5 5 5 555192 110776 82863 57181 47897 50926 9065 8696 12176 14472 2069216 103069 481040 112406 251863 417522 94004 74167 45005 33425 8.1 7.9 10.5 5 5 Pakistans SAFTA preferential rates for India 5 5 N/A 5 5
Source: Trade Map
Annexure :XVIII Indian regulation and documentation requirement for chemical sector S. No 1 Regulations Advance Authorization Application from Industry for import of raw material against the export of Petrochemical items. 2 Applications for import of items covered under Restricted List of Import
70
Required Documents DGFT Prescribed Format as per Foreign Trade Policy
-do-
Project Import Certification for chemical industry
Complete application having CA certificate indicating expenditure incurred on the project ,CE certificate about essentiality
Approval of application/request from Petrochemical Industry for issue of Project Import Certificate.
Copy of Industrial Approval (IL/IEM).ii) Details of investment made in the project (Land, Building, and Plant & Machinery) duly certified by CA.iii) Complete list of plant & machinery required (imported and indigenous) required for implementation of the project. iv) List of capital goods in four copies with detailed technical specifications, make, model no., quantity, CIF value etc. duly signed by MD/Director of the firm. v) Capacity of plant & machinery to be imported under Project Import duly certified by Chartered Engineer.vi) Copy of Performa invoice, catalogue, letter of import of plant & machinery under Project Import.vii) Any other relevant information related with implementation of the project
Issuance of Consent Certificate for import/export of chemicals covered under Rotterdam Convention
Complete application with export notification
Issuance of recommendation for import/export of SCOMET Items
Complete application along with End-use certificate by the importing country i) Copy of Industrial Approval (IL/IEM) ii)Details of production and consumption of raw material during the last three years
71
Central Insecticides Board & Registration Committee on application/request from Petrochemical Industry for issue of End
User Certificate
duly iii) Copy of earlier approval from CIB, if available.
End-use Certificate for Non-Insecticidal application in respect of chemical industry for chemicals appended to the Insecticides Act
Complete application along with CA certificate on production and corresponding consumption for the last 3 years etc. Complete application along with copy of Board Resolution & No Objection Certificate from the existing partner of the Jt. Venture etc
Issuance of recommendation on FIPB proposals in respect of chemical industry
10
Recommendation to Department of Economic Affairs, Ministry of Finance on application for Foreign Investment Proposals in respect of petrochemical industry
SIA/FIPB prescribed format
11
Issuance of recommendation for grant of industrial license in respect of hazardous chemicals
Complete application
12
Fixation of input/output norms on export of chemicals
Complete application with manufacturing process, CA certificate on production consumption for the last 3 years etc.
13
Recommendation for R&D laboratory recognition
Complete application
14
Recommendation to Department of Industrial Policy & Promotion (SIA) on application for Foreign Technology Collaboration
SIA/FIPB prescribed format
15
Recommendation to Department of Commerce on proposal for Free Trade
FTA/CECA
72
Agreements etc. in the chemical sector & Petrochemical sectors Source: Indian Chemical and petrochemical Ministry
Annexure XIX: NTBS filed against India HS Industry Requirements Certification Country Armenia NTBs Registration, permission for importation
280000 Agro chemicals 280000 Chemicals 280000 Chemicals
Certification Registration
Colombia Strict Registration procedures EC Registration/ testing & certification under REACH (wef June, 2007) costs around Euro 85000 - 325000 per chemical, about 30000 chemicals covered. REACH mandates gathering of information by manufacturers and importers on properties of chemical substances for safe handling and register this information in a central database rune by European Chemical Agency, Helsinki
280000 Chemicals
Immigration
Middle East
280000 Chemicals
Customs
Syria
Fixed commission of 5% of the value of the total import.
280000 Chemicals
Documentation UAE
Attestation of documents by UAE which is costly /time consuming
73
280000 Chemicals
Regulations
UAE
Enquiries through middlemen wherein product specifications are vague
280000 Chemicals 284400 Nuclear material 290000 Agro chemicals 290000 Chemicals 290000 Chemicals
Certification Certification
Korea Armenia
Prior Approval required Authorization issued by the Government
Certification
Armenia
Registration, permission for importation
Certification Registration
Colombia Strict Registration procedures EC Registration/ testing & certification under REACH (wef June, 2007) costs around Euro 85000 - 325000 per chemical, about 30000 chemicals covered. REACH mandates gathering of information by manufacturers and importers on properties of chemical substances for safe handling and register this information in a central database rune by European Chemical Agency, Helsinki
290000 Chemicals
Customs
Syria
Fixed commission of 5% of the value of the total import.
290000 Chemicals
Documentation UAE
Attestation of documents by UAE which is costly /time consuming
290000 Chemicals
Regulations
UAE
Enquiries through middlemen wherein product specifications are vague
290000 Chemicals 330000 Cosmetics
Certification Certification
Korea Ukraine
Prior Approval required Compulsory Certification i.e. (a) Certificate of

74
& Toiletries
acceptance of foreign certification by Derzh Standard or (b) Conformance certificate by Ukrainian agency. ISO 9000 standards adopted by Derzh Standard on production systems. Foreign certification recognition only to the extent of international treaty obligations of Ukraine.
360000 Matches
Minimum Import Price
Argentina If price below MIP, importer to validate invoice from Customs in origin country and submit full set of original documents
380000 Insecticides/ Minimum Fungicides Import Price
Argentina If price below MIP, importer to validate invoice from Customs in origin country and submit full set of original documents
380000 Agro chemicals 380800 Pesticides
Certification
Armenia
Registration, permission for importation
Standards
EC
Non harmonized maximum residue limit (MRL)
Source: Indian Ministry of Commerce
75

32-Pakistan Trade Liberalization Sectoral Study On Chemical Sector

Загружено:

Сведения о документе

Исходное описание:

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

32-Pakistan Trade Liberalization Sectoral Study On Chemical Sector

Загружено:

Авторское право:

Доступные форматы

PAKISTAN INSTITUTE OF TRADE AND DEVELOPMENT

Working Paper Series Draft Report

By: Sohail A. Paracha

d) Indian Import Policy Conditions & Requirements for Fertilizers Chemicals....................... 30

Tanning or dyeing extracts (HS-32) ............................................................................... 30

10. Conclussion ........................................................................................................................... 53 11. Recomendations..................................................................................................................... 54 12 Annexture 55

Global Chemical Outlook 2011 (UNEP)

Classification of Chemical Industry:

Life science Chemicals: include differentiated chemical and biological substances,

Specialty Chemicals: Products include electronic chemicals, industrial gases, adhesives

The chemical industry in Pakistan and India is classified as follows:

Classification of Chemical Industry in Pakistan A.

Classification of Chemical Industry in India

Global Trend Analysis of Chemical Industry

producers of chemicals are USA, Germany,

China, Belgium, Japan, France, Netherlands,

Figure # 1 Source: Trade Map

BOI Chemical & Dyes Merchants 13

Trend Analysis of Indian Chemical Industry:

Ministry of Chemicals, India

Source: Indian Ministry of Commerce

Organic Chemicals (HS 29)

Figure # 3 Source: Trade Map

Chemical Development Vision 2030

Grand Total Source: Indian Ministry of Commerce

Chemical Development Vision 2030

Grand Total Source: Indian Ministry of Commerce

Figure # 8 Source: Trade Map

Economic Survey of Pakistan 2010-11 Economic Survey of Pakistan 2010-11 29

materials and intermediates mainly belong to or derived from

Chemical Development vision 2030 Magnetic titanium oxide 32

No. of Tariff Lines 2 2

Drugs & Cosmetics Acts & Rules Total

Source: Ministry of Commerce India 4.7 Albuminoidal substances (HS-35)

from India of US$ 371 thousands,

Source: Ministry of Commerce India

Explosives Chemicals (HS-36)

Indian Import Policy Regulations

No. of Tariff Lines 11 33

Subject to conditions as specified in public notice issue in this behalf

Ministry of Chemicals India

Trade defense laws/Regulations for Chemicals Industry

Ministry of Chemicals & Petrochemicals India

Source: Trade Map Authors Own Calculations Annexure III

292249 292429 291612 293299

20028 21657 20860 16473

1763 4014 0 3054

22892 31467 14782 22044

18265 17643 14782 13419

Source: Trade Map

Source: Trade Map (Authors own Calculations) Annexure V

283329 282300 283110

Sulphates of metal nes Titanium oxides Dithionites and sulphoxylates of sodium

10049 9059 9671

37162 43973 15040

9963 9059 7839

Phosphoric acid & polyphosphoric acids

283620 283319 284130 282110 283329

4485 3303 4261 4052 10049

51774 5141 3266 3268 37162

4480 3303 3234 3233 9963

Source: Trade Map Annexure VI