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

2

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.

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Table of Contents

1. Introduction ............................................................................................................................. 6

2. Classification of Chemical Industry: ....................................................................................... 9

3. Trend analysis of chemical Industry ...................................................................................... 12

4. Pakistan-India Bilateral trade of Chemical Industry ............................................................. 14

a) 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

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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


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


c) Indian Import Policy Conditions & Requirements for Miscellaneous Chemicals ................ 42

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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 Indian Regulations & Documentation Requirement in Chemical Sector: ..................... 45

(a) Indian NTBs on Pakistani chemicals ............................................................................. 46

(b) NTBs Product-Wise: ...................................................................................................... 46

8. Revealed Comparative Advantages (RCA) in Chemical Sector ........................................... 47

9. SWOT Analysis of Pakistans Chemical Sector: .................................................................. 49

10. Conclussion ........................................................................................................................... 53

11. Recomendations..................................................................................................................... 54

12 Annexture 55

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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 &

1 Global Chemical Outlook 2011 (UNEP)

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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. Identification of Pakistans export potential, for the chemical sector, in India.

2. Identification of Indias export potential, for the chemical sector, in Pakistan.

3. Identification of segments of chemical industry which are not competitive vis a vis India.

4. Identify the comparative tariffs of Pakistan and India for the particular product range.

5. 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.

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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.

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2. Classification of Chemical Industry:

For marketing purpose the chemical industry is divided into following main categories globally.

2.1 Basic Chemicals: This category is also known as commodity chemicals which is

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 sub-

category 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.

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

Classification of Chemical Industry in Pakistan Classification of Chemical Industry in

India

A. In Pakistan, the industry has been classified

into two sectors according to Chemical

Industry Development-Vision 2030,

1. Primary Sector Chemical Industry: It is

the classification of primary sector Industry

based on the conversion of natural

resources (ores) into primary products.

In Pakistan this industry is well established,

having large scale units, highly

sophisticated, capital intensive and

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

(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

Chemical Industry in India has been classified

on the basis of chemical sub-segments.

1. Basic Chemicals: also known as

commodity chemicals includes

organic chemicals, inorganic

chemicals, bulk petrochemicals, other

chemical intermediates, plastic resins,

manmade fibers, dyes & pigments and

printing inks etc.

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.

3. Agriculture Chemicals: These are

classified as crop protection chemicals

such as pesticides etc.

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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,

processing, blending, fabricating plants for

petrochemical intermediates, polymers,

plastics, steel, non-ferrous metals,

minerals, agricultural and miscellaneous

products. These industries use medium- to

high-sophisticated technology, and range

from light to medium categories.

4. Whereas drugs, pharmaceutical and

fertilizers industries are considered

separately as independent sector in

India.

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.

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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

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

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

Table: 1

Ranking Country 2010 %

Shares

0 World 945.7

1 United States of

America

108.5 11%

2 Germany 90.8 10%

3 China 70.5 7%

4 Belgium 56.3 6%

5 Japan 53.3 6%

6 France 51.8 5%

7 Netherlands 46.7 5%

8 United Kingdom 38.5 4%

9 Ireland 38.1 4%

10 Republic of Korea 26.7 3%

18 India 16.2 1.7%

93 Pakistan 0.2 0.02%

Source: Trade Map (US $ billions)

Chemicals included: (HS) 28,29,31,32,33,34,35,36,37 & 38

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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.

3 BOI 4 Chemical & Dyes Merchants

Figure # 1 Source: Trade Map

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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. Pakistan-India Bilateral trade of Chemical Industry

a) 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.

5 Ministry of Chemicals, India

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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

%

Pakistan's

exports to

world

Pakistan's

exports to

India

India's

imports

from

world

Indicative

potential

trade

28 In-Organic Chemicals 8 6.95 16.42 11.36 188.22 5.07

29 Organic Chemicals 14 6.47 40.82 25.74 2053.58 14.90

32 Tanning & Dyeing Chemicals 4 8.13 8.27 0.04 104.58 8.23

33 Essential oils and resinoids 1 10.00 1.11 0.02 4.54 1.09

34 Soap, organic surface-active 2 10.00 0.40 0.02 35.60 0.38

35 Albuminoidal substances 1 15.40 8.47 0.35 5.58 5.22

36 Matches Chemicals 1 10.00 20.33 0.38 0.00 0.00

38 Miscellaneous chemical products 5 7.50 13.29 1.81 595.23 11.47

Grand Total 36 7.58 109.11 39.72 2987.33 46.35

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 Figure # 2 Source: Trade Map

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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

Chapter Product Label

No. of

Tariff

Lines

Average of

Tariff

Applied by

Pakistan

on India

%

Pakistan's

imports

from

world

Pakistan's

imports

from

India

India's

exports

to world

Indicative

potential

28 In-organic Chemicals 48 5.3 87.45 8.90 1668.13 55.53

29 Organic Chemicals 181 6.3 1298.77 260.67 7044.84 688.85

31 Fertilizers 7 0.7 25.92 1.15 28.38 13.33

32 Tanning & Dyeing Chemicals 28 12.1 240.13 41.97 1475.75 175.99

33 Essential oils and resinoids 11 12.6 52.87 3.24 595.43 48.94

34 Soap, organic surface-active 10 14.5 121.22 11.83 188.11 87.39

35 Albuminoidal substances 6 10.8 29.58 0.37 95.12 29.21

37 Photographic Chemicals 5 5.0 12.90 0.15 33.96 3.58

38 Miscellaneous chemical products 30 9.2 517.16 50.93 1472.18 397.94

Grand Total 326 7.3 2386.00 379.20 12601.90 1500.76

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.

17

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 Inorganic Chemicals 8 19.28

29 Organic Chemicals 31 18.21

32 Tanning & Dyeing Chemicals 8 15

33 Essential Oils & Resinoids Chemicals 4 35

34 Soaps, organic surface-actives agents 3 31.6

35 Albuminoidal Substances 4 20

37 Photographic Chemicals 2 17.5

38 Miscellaneous Chemicals 5 12

Grand Total 65 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 Inorganic Chemicals 1 8

32 Tanning & Dyeing Chemicals 8 8

33 Essential Oils & Resinoids Chemicals 15 11.6

34 Soaps, organic surface-actives agents 2 8

35 Albuminoidal Substances 2 10

36 Ristricted/Explosive Chemicals 1 10

38 Miscellaneous Chemicals 2 12

Grand Total 31 9.6

Source: Indian Ministry of Commerce

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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


19

organic chemicals such as Terephthalic acid and its salts, Dioctyl orthopthalates and 1, 2-

dichloroethane (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

6 Chemical Development Vision 2030

20

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


21

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

25

II Imports are permitted subject to Registration and other requirements as

administered by Drug Controller General of India under the provisions of

5

22

Drugs and Cosmetics Act

III BIS (only required for Hexane, food grade) 1

IV SPS Requirement 1

V Restricted 25

Grand Total 57


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%.


23

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

24

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.

25

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


26

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, Sri-

Lanka, 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

27

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 On No of Tariff Lines

I Import is subject to section 14(1)(ii) of the Atomic Energy Act, 1962 and

Rules there under

10

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

2

III Import of thorium nitrate is subject to section 14(1)(ii) of the Atomic

Energy Act, 1962 and Rules there under

1

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.

1

V Restricted 14

Grand Total 28


28

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


29

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 Economic Survey of Pakistan 2010-11 9 Economic Survey of Pakistan 2010-11

30

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 (HS-

31021000) 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. Indian Import Policy Regulations No. of Tariff Lines

I Import allowed through STC, MMTC and Indian Potash Limited

subject to Para 2.11 of Foreign Trade Policy

1

II Restricted 2

III State Trading Enterprise 1

Grand Total 4

Source: Ministry of Commerce India

4.4 Tanning or dyeing extracts (HS-32)

Most of the raw materials and

intermediates for dyes & pigments,

paints & varnishes, pesticides and

plastics & plasticizers are being

imported by Pakistan. These raw

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

31

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

32

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

Chemical Development vision 2030 12

Magnetic titanium oxide


33

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.


I BIS (required only for specified food color) (HS-32019090, other) 1


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.

34

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 is about 28%,

similarly the duty 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


35

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. Indian Import Policy Regulations No. Of Tariff Lines

I Restricted 1

II Import will be subject to the provisions of Convention of

International Trade in Endangered Species of Wild Fauna &

Flora (CITES).

1

III Drugs & Cosmetics Acts & Rules 48

Total 50


4.6 Soaps/Detergents (HS-34)

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.

36

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

Pakistans global demand of

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.


37

No. Indian Import Regulations No. of Tariff Lines

I Restricted 2

II Import is restricted in terms of Interim PIC Procedure of Rotterdam

Convention on Prior Informed Consent procedure for hazardous

chemicals and pesticides

2

III Drugs & Cosmetics Acts & Rules 6

Total 10


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.


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


38

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.


I Health Protocol (SPS Requirement) 3

II Prohibited 4

III Not permitted to be imported 4

IV Subject to Wild Life (Protection) Act, 1972 and CITES. 4

V (Protection) Act, 1972 and CITES. BIS(required only for food grade) 1

Total 16


39

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


40

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. Indian Import Policy Regulation No of Tariff Lines

I Import of cinematograph films and other films shall be governed

by the provisions of Public notice no. 64/1997-2002 dated

29.01.2002

24

Source: Indian Ministry of commerce

4.10 Miscellaneous Chemicals: (HS-38)

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.

41

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 by India on these

products were about 12%,

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.


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).


42

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.


43


I Restricted 11

II If registered and not prohibited for import under Insecticides Act,

1968 and formulations thereof

33

III Import is restricted in terms of Interim PIC Procedure of

Rotterdam Convention on Prior Informed Consent procedure for

hazardous chemicals and pesticides

1

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

behalf

3

V The import of any alcohol which is directly potable or can be used

for making potable alcohol is however, not permitted

3

Total 51


6. Policies and Procedure for Chemical Industry

6.1 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

44

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 hydro

Documents

32-Pakistan Trade Liberalization Sectoral Study on Chemical Sector