Negotiating through the troubled waters of protective regimes and liberalized economic policies, the Chlor-Alkali industry is slowly recovering from slump. When India drew attention during the Asian crisis by containing the impact of the trauma, though partially successful in its attempt, the country has become an attractive dumping ground for South-Asian and European countries. By filing the maximum number of dumping cases, the Chemical industry inked its concern for free but fair trade practices before the Government and that finally resulted in India slapping a provisional anti-dumping duty on imports of Sodium Hydroxide (Caustic Soda) from France, Iran, Japan, USA and Saudi Arabia from Jan 2001.

Riding on a roller coaster for more than six decades, the Chemical industry has many more unsavoury notes to present. Six decades ago, when India launched the commercial production of caustic soda and other allied products, the demand from industrial segments was primarily met by imports. During 1960’s the installed capacity increased quite considerably touching 1.21 lakh MT and within a decade, indigenous production completely replaced imports.

The industrial slump due to the energy crisis in the seventies prolonged the demand crunch even in 1980s and beyond while installed capacity went on increasing. In 1983, the installed capacity reached 9.33 lakh MT while demand stagnated at 6 lakh MT, necessitating the industry to run at low capacities. For the next two years, 1985 and 1986, the Chemical industry was totally unprepared to contain yet another flood of imports. At that time, the industrial lobby was able to press the government to revamp the import policy.

Today, Chlor-Alkali is one of the prominent players in the chemical process industry that has a share of approximately 12 per cent in the total industrial production. In the earlier years, the government had laid down many effective policies curbing imports and controlling pricing and allocation of feedstock etc. through a licensing regime. But the present liberalized economy gives no further hopes for retention of such measures exercised by the government in a protected economy though such measures had a greater impetus on the growth of Chlor-Alkali industry.

The globalisation has opened Indian doors for foreign participation in the industry and chemical sector was partially successful in competing with the global technological developments. At present, more than 50 percent of the Chlor-Alkali industry has switched over to environment friendly membrane cell process that is widely used in the world.

India basically differs from global Chlor-Alkali markets as the downstream industries are Caustic soda-based and it is considered to be the prime mover for the industry unlike other countries where chlorine [the by-product of Caustic soda] is widely used. This situation essentially steered towards violent fluctuation in caustic soda prices - ranging from $ 30 per ton to $ 350 per ton - in the global markets as chlorine recovered most of the cost in Chlor-alkali production. The situation is different in India as the caustic soda is treated as the main product and therefore it has to recover at least 65 per cent of the production cost for a Chlor-alkali plant to be economically viable.

The Alkali manufacturers association of India has been forwarding its suggestions for quite some time to draw the attention of the government. The ever-increasing energy cost and capital costs coupled with the drastic reduction in import duties have outcast Indian Chlor- Alkali manufacturers from Global competitors.

In order to safeguard the industry from the on-going price mismatch between the domestic and international markets, the government slapped anti-dumping duty in the month of January this year. At the same time, the chemical manufacturers were voicing intermittent pleas to stop imports and the domestic users were seeking ban on exports.

When the government imposed anti-dumping duty on imports, the domestic prices have recovered and the time was ripe for the producers of Caustic Soda to jack up prices to the tune of 40 per cent by curtailing production.

But how far they can play on price especially when the industry is prone to violent price fluctuations in the world markets?