Is India’s action against MEG dumping protecting domestic industry or hindering competitiveness?

India's burgeoning polyester industry finds itself at a crossroads. While domestic production of vital raw materials like Monoethylene Glycol (MEG) is steadily increasing, the country still remains heavily reliant on imports. This dependence has created a complex scenario where affordable imports are essential for downstream industries, but simultaneously pose a threat to the profitability of domestic MEG producers. The recent initiation of an anti-dumping investigation into MEG imports from Kuwait, Saudi Arabia, and Singapore highlights this delicate balancing act.

Growing industry with an import reliance

As detailed in ‘India's Polyester Raw Material Landscape: A Tightrope Walk Between Domestic Products and Imports’, the Indian polyester industry is a key contributor to the national economy. However, domestic production of MEG, a crucial component in polyester manufacturing, struggles to keep pace with the growing demand. This gap necessitates substantial imports, primarily from Saudi Arabia, the US, and Singapore.

Table: India’s MEG production and imports

Source: Industry reports and publications

This reliance on imports has created a price disparity that puts pressure on domestic MEG producers like Reliance Industries Limited (RIL).

Allegations of dumping

RIL, through the Chemicals and Petrochemicals Association of India (CPMA), has alleged that MEG imports from Kuwait, Saudi Arabia, and Singapore are being ‘dumped’ – that is, sold at prices below their fair market value. This practice, they argue, is causing ‘material injury’ to the domestic MEG industry. The CPMA claims that despite a lack of public data on production costs in the exporting countries, the significantly lower export prices are evidence of dumping.

The Director General of Trade Remedies (DGTR) has meanwhile initiated an anti-dumping investigation covering the period from April 2023 to March 2024. The investigation will examine whether dumping has occurred and, if so, to what extent it has harmed the domestic industry. If the DGTR finds evidence of dumping and injury, anti-dumping duties may be imposed on MEG imports from the countries in question.

While anti-dumping measures can protect domestic industries from unfair competition, they can also have unintended consequences. Increased import costs can negatively impact downstream industries that rely on affordable MEG, such as textile manufacturers. This could make them less competitive in the global market, potentially leading to job losses and decreased economic activity. Furthermore, anti-dumping duties can lead to retaliatory measures from the affected countries, potentially harming India's export interests in other sectors.

Therefore, the DGTR's investigation must carefully weigh the potential benefits of protecting the domestic MEG industry against the potential harm to downstream industries and the broader economy. A nuanced approach is required, one that considers the long-term implications of any decision.

This implies, instead of blanket duties, targeted duties could be imposed on specific exporters found to be engaging in dumping. Support could be provided to downstream industries to help them adapt to higher MEG prices, such as through technology upgrades or access to alternative raw materials. And India could engage in dialogue with the exporting countries to address concerns about dumping and explore mutually beneficial solutions.

Indeed, the anti-dumping investigation into MEG imports is a complex issue with far-reaching implications. A balanced approach is needed to protect the interests of both domestic producers and downstream industries. By carefully considering all aspects of the issue, India can ensure a sustainable and competitive polyester industry for the future.