There is an urgent need to fix import duty on feedstock for petrochemicals including naphtha, natural gas liquids (NGL), propane and butane at zero rate to make investments in this sector financially viable and encourage domestic value addition. Currently all these feedstock have higher duty resulting in nil to negative protection to the sector, according to an Assocham study.

"The import tariff for the next level of products can be at a slightly higher level with progressive increase in duty rates to encourage domestic value addition, more so as there are compelling reasons to remove the duty anomaly prevailing in the petrochemical sector so that domestic investment becomes financially viable," the study said.

"Import duty rationalization across petrochemical value chain is imperative for increasing domestic capacities and reducing dependence on imports," said DS Rawat, secretary general of Assocham while releasing the study.

The Assocham study has also warned that tariff elimination on key petrochemicals under the proposed FTA with six nation Gulf Cooperation Council (GCC) would result in massive surge in imports thereby further deteriorating India’s existing trade imbalance with GCC countries.

"India, owing to its limited production capacity, depends on imports for toluene to meet its demand and its geographical proximity to the GCC makes it vulnerable to threat from GCC imports as it has surplus exporting capacity of toluene and is increasing its capacities to touch about 20 montmorillonite (MMT) by 2015," it added.