Delays Anticipated to Oman-India FTA Over Duty Concessions on Petrochem Products

Customs duty concessions on petrochemical products, utilized heavily in the plastics industry, are raising concerns among Indian stakeholders.

Customs duty on petrochemical products, specifically polypropylene and polyethylene, primarily utilized in the plastics industry, could pose a hurdle in the early finalization of discussions for the proposed free trade agreement (FTA) between Oman and India, as indicated by an Indian official and reported in the PTI. The negotiations for the agreement, officially named the Comprehensive Economic Partnership Agreement (CEPA), are currently in the final phase.

Some stakeholders in both the public and private sectors within India oppose granting duty concessions on these products under the agreement. Their argument centers around Oman allegedly providing substantial subsidies to its industry for the raw materials used in the production of these petrochemical products. According to these stakeholders, offering duty concessions on these already subsidized products would confer a dual advantage to Omani firms. The government official mentioned ongoing discussions with domestic players regarding this issue. Nevertheless, domestic plastic manufacturers argue that reducing duties would boost the labor-intensive sector, as raw material costs constitute about 60 percent of the final goods.

Currently, customs duties on these products stand at approximately 7.5 percent. Additionally, there is an 18 percent Integrated Goods and Services Tax (IGST) imposed to counterbalance the goods and services tax incurred by domestic products.

In FY 2022-23, out of the total imports from Oman amounting to US$7.5 billion, US$383 million was attributed to polypropylene and ethylene polymers. Reliance is the largest producer of polypropylene in India, whereas Haldia Petrochemicals holds the leading position in polyethylene production. Other notable players in this segment include Indian Oil, GAIL (India), and other state-run oil companies.

In December 2023, officials from both countries concluded the second round of talks for the Oman-India CEPA agreement.

The content of most chapters in the CEPA agreement have been concluded by officials from both sides.

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