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NEW DELHI, Sept. 3

CONFLICTING signals have emerged from the office of the Director General (Safeguards) on the issue of safeguard duty on epichlorohydrin.

In a detailed report dated June 25, the DG, Mr R.K. Gupta, had suggested a graded safeguard duty for the chemical - 22 per cent for the first year, 15 for the second and nine for the third - in addition to the existing 25 per cent customs duty.

However, a meeting of the Standing Board on Safeguards, chaired by the Commerce Secretary that met on July 29, has said that imports of epichlorohydrin would be subjected to a safeguard duty of 12 per cent, for one year.

This "reversal of stand" has surprised even some of the officials of the DG's office. This is because the original recommendation was arrived at after several months of detailed investigation into whether or not epichlorohydrin (ECH) should be protected with a safeguard duty.

In India, ECH is mainly produced by the Chennai-based Tamilnadu Petroproducts Ltd (TPL). The DG (Safeguards) had determined the protection structure based on the considerations of `increased imports', `unforeseen developments' and `serious injury' to the domestic industry.

In his report of June 25, the DG (Safeguards) observes: "imports have risen both in absolute terms as well as relative to domestic production." Therefore, "I hold the consideration of `imports' to be fully justified in this case." He also points out some "unforeseen developments" (such as non-availability of key raw materials), which resulted in increased imports.

On the issue of `serious injury', the report discusses the effect of imports on the domestic production, capacity utilisation, sales, profitability and employment, and says that the Indian producers "suffered serious injury, as reflected by a significant overall impairment in their performance in 1998-99 and 1999-2000. TPL incurred a loss of Rs 53.85 crore in 2000-01.

In conclusion, the report says, "in view of the findings, it is concluded that increased imports of ECH into India have caused and further threatened to cause serious injury to the domestic producers of ECH and it will be in the public interest to impose a safeguard duty for a period of three years on imports of ECH into India."

However, the Standing Board on Safeguards still chose to reduce the duty level to 12 per cent, and that too for just one year. No reasons for this have been given.

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