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Anti-dumping duty on polypropylene dampens India-Saudi relationship

By Syed Nazakat in Riyadh

When he invested $32 million in a steel factory in Pune in 2008, Saudi business tycoon Abdulrahman Al Zamil’s aim was to have a strong presence in India, one of the fastest growing economies. Later he expanded with an air-conditioning facility in Himachal Pradesh and a joint venture in the telecom sector with an Indian company. His eyes, however, were always set on the petrochemical business. But Al Zamil’s plans took a beating in 2009 when India decided to impose 22 per cent anti-dumping duty on polypropylene (PP) products from Saudi Arabia. “We are disappointed with the Indian government’s approach towards us,” said Al Zamil. “Our government has officially told India that we did not expect such an unprecedented and WTO inconsistent approach to be applied to a strategic partner.”

Dumping occurs when a manufacturer exports a product at a price lower than either the price in the home market or the cost of production. Many in Riyadh believe that India invoked the anti-dumping law on polypropylene from Saudi to favour Reliance Industries chairman Mukesh Ambani. RIL and Haldia Petrochemicals, the only producers of PP in the country, had filed a complaint against the Saudi companies, which led to the invocation of the anti-dumping duty. “For the sake of one person India is putting the strategic relationship at stake,” said Al Zamil. RIL declined to comment on the issue.

Talmiz Ahmad, Indian ambassador to Saudi Arabia, however, dismissed the charges. “We don’t take national decisions to serve the purpose of one individual,” he said. Saudi is giving its manufacturers a subsidy, which makes their product cheaper in the Indian market, he said.

In a notification on June 15, 2009, the ministry of finance said PP products had been imported to India from Saudi at prices below their Saudi market price and the Indian domestic industry had suffered because of dumping of the Saudi goods. India imports 25,000 tonnes of polypropylene from Saudi a year. PP is used in industries such as packaging, auto, plumbing, furniture and medical appliances. Saudi officials, however, said the country’s vast reservoir of gas (propylene is a byproduct of natural gas processing and petroleum refining) and the location of petrochemical plants close to gas pipelines reduced the costs substantially. Saudi also claimed that gas is supplied to its manufacturing companies at the commercial rate prevailing in the international market. Saudi ruler King Abdullah bin Abdul-Aziz Al Saud has appointed a task force chaired by the Saudi deputy minister for petroleum affairs to resolve the issue.

Though India and Saudi had a number of talks on the issue, they could not reach an amicable solution. The dispute has direct implications on the bilateral relationship between India and Saudi. “This is perhaps the only dispute which we have with the government of India,” said Abdulaziz Binsalamah, Saudi deputy information minister. “For the benefit of our relationship we must solve it.”

India is the fourth largest market for Saudi exports and the bilateral trade is about $25 billion. For India, Saudi is not only an important source of petroleum, but also home to two million Indians who remit $20 billion to India every year. Saudi had a dispute with China over the anti-dumping taxes. After a series of negotiations, it persuaded Beijing to lift the duties. But given the significant differences, the issue with India is not likely to be solved soon.

(2 Oct, 2011, THE WEEK)

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