Indonesia imposes 20% surcharge on propylene imports
Indonesia imposes 20% surcharge on propylene imports
JAKARTA (JP): The government has imposed a 20 percent surcharge on propylene imports, on top of the current five percent duty, Minister of Industry and Trade Tunky Ariwibowo said yesterday.
"This policy is aimed to ensure business transparency and will not affect either propylene producers or users," Tunky said after meeting foreign trade attaches and business groupings at his office here.
Tunky argued that the surcharge is expected to make transactions between propylene producers and consumers transparent and encourage them to make long-term purchase contracts.
Industry analysts, however, said they were surprised by the move, which contradicted Tunky's statement last September that the government would give neither tariff protection, tax incentives nor regulatory protection to the country's first olefin plant in Cilegon, West Java, which is owned by PT Chandra Asri Petrochemical Center.
In mid-1994, the company asked the government for tariff protection against imported olefin products, including propylene. The call sparked vigorous public debate involving economists, legislators, company executives and ministers.
There are currently two producers of propylene in the country, Chandra Asri with a production capacity of 243,000 tons per annum and the state oil company Pertamina's export-oriented oil refinery in Indramayu, also in West Java, with a production capacity of 186,000 tons per annum.
Chandra Asri's propylene is used by PT Tri Polyta Indonesia's polypropylene plant, which is also located in Cilegon. Tri Polyta is a public company whose shares are listed on the Nasdaq stock exchange in New York.
Effectivity
A Tri Polyta spokesperson was quoted by Reuters as saying in New York on Tuesday that the company had been told the surcharge is applicable on shipments after Feb. 2 and is effective until June 30.
Tunky said yesterday, however, that the 20 percent surcharge may be extended after June 30.
Tri Polyta also said Chandra Asri had canceled an interim propylene supply agreement with the company which was due to expire March 31.
Tri Polyta expects to continue to purchase propylene from Chandra Asri on an ad hoc basis and to enter into negotiations for a new purchase arrangement taking into account the surcharge.
It currently purchases about 60 percent of its propylene needs from Chandra Asri and imports the rest to meet its feed stock requirements.
Chandra Asri is jointly owned by the Barito Pacific and Bimantara and Napan groups -- all believed to wield strong political clout -- and Japan's Marubeni Corp. The first two groups also have stakes in Tri Polyta.
Tunky said that the 20 percent surcharge on propylene imports will not affect the production costs of companies in the downstream level because the protection on polypropylene remains unchanged.
Imports of polypropylene are currently subject to a 20 percent import duty and another 20 percent surcharge.
Tunky added that the introduction of the surcharge is aimed to make the country's industrial structure more integrated from upstream to downstream.
"We would like to reduce imports. Therefore, we would like to have our own industry substitute imports. That is the upstream industry.
"However, we don't want to impose tariffs because everybody will then be suffering. It will be a win-lose situation, and we don't want it," Tunky told reporters after attending the meeting.
Yesterday's meeting, closed to the press, was attended by 38 Indonesian trade attaches overseas and representatives of nine business groupings, including the Indonesian/German business group Ekonid, the Indonesia/Netherlands Association, the Indonesia-Canada Business Council, the American Chamber Indonesia and the Korean Business Community.
"At the meeting, we gave further information on our January deregulatory measures and collected inputs from foreign representatives," Tunky said. (kod/rid)