Lotte Pakistan to firm up expansion plans subject to govt response

20 Jul '11

3 min read

Lotte Pakistan which had earlier this year announced adding new purified terephthalic acid (PTA) capacity said it will wait till year-end for a positive response from the government to its proposal to increase PTA import duty, before firming up its plans.

Lotte Pakistan PTA Limited (Lotte PPTA), a division of the South Korean group, KP Chemicals, intends to spend between $400-500 million to enhance capacity of their PTA producing plant to one million tons per annum.

Lotte had requested the government to remove distortions in tariffs on PTA imports, as the current duty structure benefited and protected the PTA users and not the producers. Lotte is speaking to various organs in the government like the Ministry of Finance, Ministry of Textile, Ministry of Commerce and Board of Investment (BoI).

Last year, the Pakistani government had reduced PTA import duty from 7.5 percent to 3 percent, after the expiry of the 10-year investment benefit it provided to ICI, which had set up a plant in 1998. Lotte bought over the plant from ICI in 2009.

The original plant was put by ICI with a design capacity of 400,000 tons per annum. It has gradually been de-bottlenecked to 500,000 tons per annum which is the current capacity.

The PTA market in Pakistan is presently around 750,000 tons per annum with the balance demand met via imports. With new polyester expansions in future, Lotte PPTA expects to absorb a large portion of its new capacity in downstream market.

Currently Lotte is the only producer of PTA in Pakistan and fully imports the raw material – paraxylene (PX) which goes in to production of PTA. It however also intends to setup a PX plant, subject to the PTA plant reaching economies of scale.

Speaking exclusively to fibre2fashion, Mr Adnan Samdani – Corporate Strategy Manager at Lotte PPTA said, “In 2010, Pakistan reduced import tariff on PTA from 7.5% to 3%. This was a decision which penalized PTA producers, despite the fact that PTA is a highly capital intensive industry.

“Lotte PPTA has been engaged in a dialogue with the government over the last two years and has requested that the import tariff should be returned to the original 7.5%. In addition, we have requested for normal investment related incentives such as a tax holiday, duty free import of machinery, etc.

“On being quizzed on the probability of the government acceding to their request, he replied by saying, “Lotte PPTA have pointed out that for PTA and its related upstream and downstream industries, the natural comparison is with both China and India, since the industry structures of these countries as far as their linkages into PTA are concerned are very similar to Pakistan.

“China & India currently boast two of the most developed polyester and PTA industries in the region. These investments have received protection from the government in the form of import tariffs, which have been reduced only recently, as the receptive industries reached economic scales of operation.

“However even today, when the PTA industry in China has reached a size of more than 15 million tons per annum, it continues to receive protection in the shape of 6.5% import duty. India also provides its PTA industry an import tariff protection of 5% despite its overall size of over 4 million tons per annum”, he winded up by saying.

Fibre2fashion News Desk - India

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