WORLD TRADE
ORGANIZATIONG/SG/N/8/IND/11
19 July 2002
(02-3999)
Committee on Safeguards Original:  English
NOTIFICATION UNDER ARTICLE 12.1(B) OF THE
AGREEMENT ON SAFEGUARDS ON FINDING A SERIOUS INJURY
OR THREAT THEREOF CAUSED BY INCREASED IMPORTS
INDIA
The following communication, dated 11 July 2002, has been received from the Permanent
Mission of India.
_______________
Please refer to this Mission's letter dated 22 March 2002 forwarding therewith a copy of a
Notice (Notification No. SG/INV/1/2002 dated 14 March 2002) of initiation of a safeguardinvestigation by the Director General (Safeguards) on imports of Epichlorohydrin (ECH) into India.
This notification under Article 12.1(a) of the Agreement on Safeguards was circulated as document
G/SG/N/6/IND/12.
I forward herewith a copy of the final findin gs (Notification No. F.No.SG/INV/1/2002 dated
25 June 2002) of this investigation by the Director General (Safeguards).G/SG/N/8/IND/11
Page 2
OFFICE OF THE DIRECTOR GENERAL (SAFEGUARDS)
5TH FLOOR, `D' BLOCK, I.P.BHAWAN
NEW DELHI.
F.No.SG/INV/1/2002                  Dated:  25 June, 2002
Subject: Safeguard Duty investigation against imports of Epichlorohydrin into India under
Rule 5 of the Customs Tariff (Identification and Assessment of Safeguard Duty)
Rules, 1997 (hereinafter referred to as the SGD Rules) read with Section 8B of theCustoms Tariff Act 1975} - final findings.
NOTIFICATION
Having regard to the Customs Tariff Act, 1975 and the Customs Tariff  (Identification and
Assessment of Safeguard Duty) Rules, 1997 thereof.
A. PROCEDURE
1. The Notice of initiation of safeguard duty investigation concerning imports of
Epichlorohydrin into India was issued on 14.03.2002 and was published in the Gazette of India,
Extraordinary on 21.03.2002.  A copy of the Notice along with copy of Application and a
questionnaire was sent to all known interested pa rties to make their views known by 26 April 2002
namely:-
Domestic Producers
(i) Tamilnadu Petroproducts Limited (TPL), Chennai
Importers/User Industries
(i) Dr Beck & Co( India ) Ltd, Pune
(ii) Atul limited, Valsad, Gujarat
(iii) Synthetics & Polymer Industries, Ahmedabad
(iv) Parikh Resins Ltd (Res inova Chemie Ltd), Kanpur
(v) Resins and Plastics Ltd, Raighad
(vi) Petro Araldite Pvt. Ltd, Chennai(vii) Parikh Resins and Polymers Ltd. Unnao, U.P.
(viii) Bharat General Textile Industries, Calcutta
(ix) Bengal Poly Resins Pvt  Ltd, Calcutta
(x) Delta Industrial Resin Pvt. Ltd, Mumbai
(xi) Pragati Chemicals Ltd, Mumbai(xii) Kemwell Pvt., Ltd, Bangalore
(xiii) IPCA Laboratories  Limited , Mumbai
(xiv) Easy Term Enterprise, Mumbai
(xv) Ratanchand & Co. Mumbai
(xvi) C.J.Shah & Company, Mumbai(xvii) Manali Chemicals, Mumbai
(xviii) Urmi Chemicals, Mumbai
(xix) Rasiklal & Co., MumbaiG/SG/N/8/IND/11
Page 3
(xx) Alfa Chemical Corporation , Mumbai
(xxi) Paresh Chemical Corporation , Mumbai
(xii) Rashmi Trading  Company, Mumbai
(xiii) Beekay Enterprises, Baroda/ Mumbai
Exporters
(i) Daiso Co. Ltd., Japan
(ii) Dow Chemical Company,U.S.A.
(iii) Solvay  SA, Belgium
(iv) Hanwha Chemical Corp., Korea
Associations
(i) Chemical  Industries Association,  Chennai
(ii) Indian Resin Manufacturers Association , Mumbai
2. A copy of the notice of initiation along with the application and questionnaire was also sent to
the governments of exporting countries through their High Commissions/Embassies in New Delhi
namely Belgium, China, Germany, Japan, Korea RP, UK, US and to the European Union, Delegation
of the European Commission in India, New Delhi.
3. Request for extension of time to submit their reply was made by Dow Chemical Company,
USA and Solvay SA, Belgium.  The extension of time, prayed for, was acceded to and the parties
concerned were informed accordingly.
4. Replies to the Notice dated 14.03.2002 and to the questionnaire were received from the
following parties:-
Domestic Producers
Tamilnadu Petroproducts Limited (TPL), Chennai
Importer/User Industries
(i) Atul Limited, Valsad, Gujarat*
(ii) Synthetics & Polymer Industries, Ahmedabad*
(iii) Parikh Resins Ltd (Resinova Chemie Ltd), Kanpur
(iv) Bharat General Textile Industries, Calcutta*(v) Petro Araldite Pvt. Ltd, Chennai*
(vi) Bengal Poly Resins Pvt  Ltd, Calcutta*
(vii) Delta Industrial Resin Pvt. Ltd, Mumbai*
(viii) Pragati Chemicals Ltd, Mumbai*
(ix) Kemwell Pvt., Ltd, Bangalore(x) Beekay Enterprises, Baroda
* Through Counsel
Exporters
(i) Daiso Co. Ltd., Japan
(ii) Dow Chemical Company,U.S.A.
(iii) Solvay  SA, Belgium
(iv) Hanwha Chemical Corp., KoreaG/SG/N/8/IND/11
Page 4
Associations
Chemical  Industries Association,  Chennai
5. Verification of the information considered necessary for the investigation was done and to
this end a team of officers visited the premises of domestic producer.  The outcome of the
investigations was conveyed to the domestic producer and a copy of the verification report was also
placed in Public File.
6. A Public Hearing was given to all interested parties on 31 May 2002, notice for which was
sent on 26 April 2002.  During the Public Hearing the interested parties were requested to file theirwritten submission of oral arguments made by them by 6 June 2002 collect replies filed by others on
7 June 2002 and to file rebuttals, if any, by 14 June 2002.  The following parties attended the Public
Hearing;
(i) Tamilnadu Petroproducts Limited (TPL), Chennai
(ii) Atul Limited, Valsad, Gujarat
(iii) Synthetics & Polymer Industries, Ahmedabad
(iv) Parikh Resins Ltd (Res inova Chemie Ltd), Kanpur
(v) Petro Araldite Pvt. Ltd, Chennai
(vi) Delta Industrial Resin Pvt. Ltd, Mumbai(vii) Solvay  SA, Belgium
(vii) Hanwha Chemical Corp., Korea
(ix) Delegation of European Commission (European Union), New Delhi
Some of the interested parties requested fo r another Public Hearing on the ground that TPL
has not effectively replied to their queries during the Public Hearing held on 31 May 2002, which has
prevented them from effectively dealing with various issues.  In this regard, it is observed that under
the procedure followed, it is not mandatory for the domestic producers to provide on the spot
clarification to the queries raised by the other parties.  The purpose of providing the opportunity of
seeking clarification at the time of public hearing is to remove doubts in understanding of the
submissions made by the other parties.  TPL had me ntioned and it was agreed that they would provide
additional information sought by other parties at the time of filing written submissions.  Accordingly,TPL has provided the necessary clarification in thei r submissions.  Further, only that information is
taken into consideration, which is reduced in writin g.  All the information so received was placed in
public file, besides handing over copies to the interested parties, who could contradict the same at the
time of filing their rebuttals, if any.  Some of the main points that were sought to be clarified by the
interested parties related to capacity of TPL, increased imports, unforeseen development, accelerateddepreciation policy of TPL, feasibility of adjustment plans etc.  All these issues have been
appropriately dealt with in the  findings and I find no justification for any further public hearing in the
matter.
Domestic Industry
The application for imposition of safeguard duty on ECH has been filed by Tamilnadu
Petroproducts Ltd (hereinafter referred to as TPL for the sake of brevity).  In India, ECH is produced
by only TPL and they account for the entire domestic production.  The application is, therefore,
considered  to have been made by the domestic industry producing ECH.
Another request has also been made on 20 June 2002 for providing a copy of the rejoinder
(rebuttals) filed by the petitioners and for permission to file comments on the same.  This request does
not merit consideration, both on ground that it is made after completion of all procedure onG/SG/N/8/IND/11
Page 5
14 June 2002 and as per procedure parties are at liberty to file rebuttals after collection of written
submissions.  The procedure does not envisage further submissions after filing of rebuttals.  If such a
request is allowed, it will be an un-ending process, leading to no finality at any stage.  The request,
therefore, could not be acceded to.
Product under Investigation
The product under investigation is Epichlorohydrin (ECH). ECH is a basic organic chemical
with chemical formula CH2-CH-CH-CH2CL, clas sified under sub-heading No. 2910.30 of the First
Schedule to the Customs Tariff Act 1975 and under 29103000 of the Indian Trade Classification
(ITC) based on the Harmonized Commodity Description.  This classification of Epichlorohydrin
under the Customs Tariff Act,1975 and the ITC has been  indicated for the purpose of convenience and
in no way restricts the scope of the coverage of the product under investigation.  ECH is produced by
Chlorine addition to Propylene which is akin to international standard of manufacturing. ECH is
produced by obtaining Allyl Chloride by direct Chlorination of Propylene and Chlorine in gaseous
phase at elevated temperatures.  Chlorohydrination of Allyl Chloride is carried out in aqueous
medium using Chlorine to obtain Dichlorohydrin.  Fu rther Hydrolysis of Dichlorohydrin is carried out
at boiling temperature of water using lime as saponifying agent.  Hydrolysing reaction is
accomplished in a stripping tower where ECH is stripped.  The raw ECH is rectified in fractionation
system.  ECH is a Petrochemical used as key ra w material in the manufacture of Epoxy Resins,
Pesticides and certain Pharmaceutical formulations.  Both, the imported ECH and the domestically
produced ECH are alike.
Commitments undertaken and the applicable rate of duty
ECH falling under Tariff heading No. 2910.30 has been bound at 40 per cent ad-valorem ,
with no quantity restrictions imposed on the imports.  The applicable rate of import duty (basic +surcharge, if any) on ECH was 65 per cent ad-valorem  in 1994-95, which was gradually brought
down to 42 per cent in 1995-96, 32 per cent in 1996-97, 25 per cent in 1997-98 and 1998-99,
increased to 27.5 per cent in 1999-2000 and 2000-01, before restoring to 25 per cent ad-valorem  in
2001-02.
Increased imports
ECH is imported into India mainly from Belgium, Germany, Japan, Korea (RP) and the US.
The import and domestic production of ECH during last five years were as under:
Table 1
Year Domestic
Production
(MT)Imports(MT)
Qty                            Value
MT                         (Rs.Lakhs)Imports as a %age of
Domestic Production
1996-97 3595 761  411.55 21.17
1997-98 2349 1931  901.41 82.20
1998-99 951 2933 1497.80 308.41
1999-00 951 4614 2104.74 485.17
2000-01 3620 4294 2550.28 118.61
2001-02(Jan) 2997 4971* 2171.91 165.87
* As verified from the Customs authorities.G/SG/N/8/IND/11
Page 6
The import of ECH during the period between 1996-97 has increased in absolute terms from
761MT in 1996-97 to 4294 MT in 2000-01.  During the year 2001-02, for which the data has been
verified with the Commissioners of Customs at th e ports of imports up to January 2002, the import of
ECH was 4971 MT.  On pro-rata basis the import of ECH during the current year 2001-02 works out
to 5965 MT.
On a comparison of end point to end point it is observed that the import of ECH has increased
to more than 6 times from 761 MT in 1996-97 to 4971 MT in 2001-02 (up to January).  It is important
to note that the import of ECH peaked to 4614 MT in 1999-2000, before declining to 4294 MT in
2000-01 and again rising to 4971 MT in 2001-02 (up to January).  The year wise increase in the
import was 154 per cent in 1997-98 over 1996-97; 52 per cent in 1998-99 over 1997-98; 57 per cent
in 1999-2000 over 1998-99, a decline of 7 per cent in 2000-01 as compared to 1999-00 and again anincrease of 40 per cent in 2001-02 (on pro-rata basis) over 2000-01.  In absolute terms, therefore, the
imports of ECH have increased over the years, except in the year 2000-01 when the imports declined
by 7 per cent as compared to the immediately preceding year.  However, on an average, during the
last three years i.e. 1999-2002 the imports of ECH on an average was 4958 MT per annum, which is
164 per cent higher than the average imports of 1875 MT during the preceding three years i.e. 1996-99.
As regards increase in imports of ECH compared to domestic production, it is observed that
the domestic production of ECH in 1996-97 was 3595 MT, which increased marginally to 3620 MT in
2000-01 and to 2997 MT in 2001-02 (up to January) i.e. to 3596 MT in 2001-02 (for the whole year)on a pro-rata basis.
The imports of ECH as a percentage of domestic production were 21.17 per cent in 1996-97
which increased rapidly to 485.17 per cent in 1999-2000 and thereafter declined to 118.61 per cent in
2000-01 but increased again by about 47 percentage points to 165.87 per cent in 2001-02.  Ascompared to the initial figures of 21.17 per cent in 1996-97, the imports show a substantially higher
percentage – 165.87 per cent of domestic production in 2001-02 which is almost eight times that of
1996-97.  Even as compared to 1997-98, when the imports were 82.2 per cent of domestic production,
the imports percentage in 2001-02 has doubled as compared to the domestic production.  The imports
have thus increased both in absolute terms as well as relative to domestic production.
It has been submitted by some of the interested parties that ‘safeguard measures’ being
‘emergency measures’, the imports must show a sudden increase in a short span.  To this end, they
suggest that imports of ECH should be considered only during the last three years i.e. 1999-2000 to
2001-02.  During this period, the imports of ECH have stagnated, being 4614 MT in 1999-2000, 4294
Mt in 2000-01 and 3846 MT in 2001-02 (up to January) and therefore there is no ‘increased imports’
of ECH.  I, however, find no support to this submission, either on the basis of facts or from the law.On facts, the imports in the current year i.e. 2001-02 (up to January) have increased by 40 per cent
over 2000-01.  As regards the legal provisions, neither the domestic safeguard law nor the Agreement
on Safeguards support this contention.  In practic e also most of the Members of WTO have been
analysing imports over a period of five years or more.  Looking to the peculiar facts of this case, as
discussed below, I hold that consideration of imports, as well as other parameters for the period 1996-97 onwards to be fully justified in this case.
Unforeseen Developments.
The domestic producers have submitted that the production of ECH was conceived in the year
1992 as an import substitute to epoxy manufacturers, who had an installed capacity of about 9000 MT
pa and the rate of duty on the import of ECH was 115 per cent and that on epoxy resins 65 per cent for
general use and 20 per cent for use in electronic industry.  By the time the ECH plant came into
production, the customs duties came down substantially and went on declining further.  Some of theirG/SG/N/8/IND/11
Page 7
buyers could not bear the onslaught of increased imports of epoxy resins and finally closed down in
the year 1998-99.  Besides, the exporters reduced the prices of both ECH and epoxy resins and
thereby captured the market, forcing the domestic producers to cut-down their production as they
could not sell their products even at a price much below their variable cost.
It has been argued by some of the interested parties that there is no unforeseen development
in the market place which could justify imposition of safeguard duty.  According to them unforeseen
developments shall normally include such of those developments which were not  foreseen by the
negotiators of a Member-country at the time of extending the concession or undertaking the said
obligation under the aegis of WTO.
As regards the ‘unforeseen developments’ it is observed that the Appellate Body in US-Lamb
(WT/DS177/AB/R, WT/DS 178 AB/R, adopted 16 May 2001) stated that “unforeseen developments”
is a circumstance whose existence must be demonstrated as a matter of fact for a safeguard measure to
be applied consistently  with Article XIX.
In this context, it is observed that it is a matter of fact that the import duty has been brought
down sharply on ECH, between the period the prod uction of ECH was conceived and the production
actually was made available, which has coincided with sharp reduction in import prices of ECH
during the period 1996-97 to 1999-2000.  The CIF imports prices during the period declined from
US$1528 per Mt to US$1059 per MT.  However, the most pertinent fact in this regard is the lack of
an internationally competitive manufacturing support.  The domestic producers conceived theproduction of ECH on the basis that Propylene, the most important raw material for ECH production
will be available to them from the Chennai Petroleum Corporation Ltd. (CPCL) but this did not come
through, as their (CPCL) supplies were enough onl y for their existing customers.  The alternative
domestic source of Propylene supply was Indian Oil Corporation, Mathura, which is far away and
involves high transportation cost besides being hazardous.  IOC has also suspended the credit facilitydue to demand/supply gap.  Efficient production of  ECH thus depended on imported Propylene.  Here
again, the Chennai Port Trust does not allow imports of Propylene through Chennai Port being
hazardous.  The domestic producers, therefore, created a small terminal facility at Cuddalore,
200 Kms from South of Chennai for facilitating imports through barges, which is quite cumbersome
and costly.  Besides the poor infrastructural facilities, high cost of power and financing make the
domestic production of ECH further in-competitive compared to imported ECH.  These unforeseen
developments have resulted in increased imports of ECH coupled with the fact of reduction in importduty and imports being allowed without any  quantitative restrictions.
Serious Injury
The determination of serious injury requires evaluation of all relevant factors of an objective
and quantifiable nature having a bearing on the situation of the domestic industry, in particular, the
rate and amount of the increase in imports of the article concerned in absolute and relative terms, the
share of domestic market taken by increased imports, changes in the level of sales, production,
productivity, capacity utilization, profits and losses, and employment.
While the rate and amount of the increase in imports of ECH in absolute terms as well as in
relative terms has already been analysed under the heading ‘increased imports’, other aspects are
discussed below:
(a) Domestic Production
An analysis of various factors attributing to the present status of domestic industry reveals
that the only domestic producer of ECH namely M/s. Tamilnadu Petroproducts Ltd., commissioned
their production in the last week of March 1995, producing only 5MT in 1994-95.  During the periodG/SG/N/8/IND/11
Page 8
under consideration, TPL produced 3595 MT of ECH in 1996-97, 2349 MT in 1997-98, 951 Mt in
1998-99 and in 1999-2000 and 3620 MT in 2000-01.  They produced 2997 MT of ECH in 2001-02
(up to January, 2002) which on pro-rata basis works out to 3596 MT for the whole of 2001-02.  The
domestic production thus declined from a peak of 3595 MT in 1996-97 to a bare 951 MT in 1998-99
and 1999-2000.  Thereafter the domestic production of ECH went up to 3620 MT in 2000-01 and to3596 MT (on pro-rata basis) in 2001-02.
Some of the parties have argued that the domestic producers had made an application for
safeguard investigation against increased imports of ECH in 1998-99, when all the essential
parameters for imposition of safeguard duty were manifold more in favour of the petitioner at that
point of time, which was rejected by the Director General.  If the petitioners did not have any case for
imposition of safeguard duty on ECH then, they have no case now.
In this regard, it is observed that TPL had filed an application for imposition of safeguard
duty on imported ECH in the year 1998-99 on 12 June 1998.  It is a matter of fact.  The more
important fact, however, is, as mentioned above, th at TPL commenced their production of ECH in the
last week of March 1995.  Thus, when TPL made the application on 12 June 1998, they had a trackrecord for the just three years immediately after commencing the production and the figures of
production of ECH during the three years i.e. 1995-96, 1996-97 and 1997-98 were  3134 MT,
3595 MT and 2349 MT respectively and that of import as 2374 Mt, 761 MT and 1931 MT
respectively.  An analysis of those figures did not support a prima facie case for initiation of a
safeguard investigation against increased imports’ of ECH causing serious injury to domesticproducers of ECH and accordingly it was not considered appropriate to initiate a safeguard
investigation at ‘that’ point of time.
As apprehended in 1998-99 by the domestic producers, however, the imports of ECH
increased in the subsequent years.  In 1998-99 the imports of ECH increased to 2933 MT from 1931MT in 1997-98.  The imports further increased to 4614 MT in 1999-2000; 4294 MT in 2000-01 and to
4971 MT (up to January) in 2001-02.  The domestic production of ECH in 1998-99 and in 1999-2000
declined to a mere 951 MT. In 2000-01 and 2001-02 the domestic production increased to 3620 MT
and 3596 MT (on pro-rata basis) respectively.  This increase in domestic production in the last two
years has, however, to be seen in the proper persp ective.  To meet with the competition from imports,
in their application dated 12.06.98, TPL envisaged an alliance with Ciba Geigy for setting up a Joint
Venture Company for manufacture of epoxy resins, thereby providing a venue for supply of ECHmanufactured by them to this new company.  Accordingly, a new company in the name of Petro
Araldite Pvt. Ltd. was set up, which was commissi oned in 1999. PAPL are into epoxy resins business
and are one of the largest consumers of ECH in the country, sourcing their requirement of ECH
exclusively from TPL, which explains the increase in domestic production of ECH by TPL in the
years 2000-01 and 2001-02.  But for this development, TPL would have not been able to find  areason to achieve higher productions. It is also pertinent to observe that the apparent domestic
consumption from 1996-97 to 2001-02 (up to January, 2002) increased from 2546 MT to 6797 MT
i.e. by 206 per cent but the domestic production of  ECH has remained almost stagnant at around 3600
MT per annum, which was the level of production in 1996-97 itself.
(b) Capacity Utilization
TPL have stated their installed capacity of ECH as 10,000 MT per annum.  Accordingly ,they
achieved capacity utilization of 35,.95 per cent in 1996-97, which kept on falling to 23.49 per cent in
1997-98, 9.51 per cent in 1998-99 and also in 1999-2000.  Keeping in line with the increasedproduction in 2000-01 and 2001-02, as discussed above, the capacity utilization also has shown
improvement over 1998-2000 to 36.2 per cent and 35.96 per cent (on pro-rata basis) for the years
2000-01 and 2001-02 respectively.  The capacity utilization,  however,  remained  at a low of  about
36 per cent at best during the period considered.G/SG/N/8/IND/11
Page 9
(c) Sales
TPL has  considered sales of ECH to PAPL as  captive consumption, but in view of the fact
that PAPL is a separate joint venture entity, which is engaged in the business of production of epoxyresins both for the domestic market, as well as for exports, it is not appropriate to consider sales of
ECH by TPL to PAPL as captive consumption.  In any case, whether used captively or sold in the
market, it does not make any difference for the purpose of safeguard investigations.  However, ECH
used by PAPL in the export production of epoxy resins, was sold by TPL on deemed exports basis
under DEEC scheme.  These sales of ECH are not being considered as a part of domestic sales.
TPL sold a total of 3753 MT of ECH in 1996-97, out of which 1785 MT were sold in the
domestic market and balance 1968 MT were exported.  In 1997-98, both the domestic sales and
exports declined to 1389 MT and 19 MT respectively.  In 1998-99 the domestic sales further declined
to 1241 MT and exports were marginally improved to 118 MT.  In 1999-2000, the domestic sales,
including export sales in the domestic market on deemed export basis to PAPL were 1656 MT, out of
which the sale to PAPL were 1196 MT for domestic consumption, 360 MT for use in exportproduction on deemed export basis and 100 MT were sold to other buyers.  In 2000-01, the total sales
by TPL were 3221 MT, which included exports of 401.57 MT of ECH, 626 MT sales in the domestic
market to buyers other then PAPL and the balanc e to PAPL including 1080 MT for export production
on deemed export basis.  In 2001-02, the total sales of ECH were 3326 MT, including 516 MT to
domestic buyers other than PAPL and balanc e 2810 MT to PAPL including 1500 MT on deemed
exports basis.
The table below gives details of Production, sales and closing stock of domestically produced
ECH.
Table 2
Sales of ECH (MT)
Year Production
(MT) PAPL Other
buyersTotal
Domestic
salesExports
including
deemed
exportsTotalClosing
Stock
(MT)
1996-97 3595 -- 1785 1785 1968 3753   278
1997-98 2349 -- 1389 1389 19 1408 1219
1998-99 951 -- 1241 1241 118 1359   811
1999-00 951 1196   100 1296 360 1656   106
2000-01 3620 1113   626 1739 1482 3221   505
2001-02(up to January)2997 1310   516 1826 1500 3326   176
It is observed from the data tabulated above that the domestic producers sold a total of 1785
MT of ECH in the domestic market in 1996-97, which gradually declined to 1389 MT in 1997-98 and
to 1241 MT in 1998-99.  Their domestic sales improved subsequently only after PAPL commenced
their production and started lifting ECH from TPL.  Th e sales to PAPL resulted in total domestic sales
improving to 1296 MT in 1999-00, 1739 MT in 2000-01 and to 1826 MT in 2001-02 (up to January).
It is observed that the apparent domestic consum ption (ADC) increased by about 167 per cent from
1996-97 to 2001-02 (on pro-rata basis).  Yearwise the ADC increased over the previous year by about
30 per cent in 1997-98; 26 per cent in 1998-99; 42 per cent in 1999-2000; 2 per cent in 2000-01 and
13 per cent in 2001-02.  The domestic sales should have also increased accordingly, which is not theG/SG/N/8/IND/11
Page 10
case.  The domestic sales (excluding quantity supplied on deemed export basis) was 1826 MT until
January in 2001-02 i.e. only 22 per cent higher than 1996-97 on a pro-rata basis.
(d) Stocks
The closing stocks of ECH of the domestic producers was 278 MT in 1996-97, 1219 MT in
1997-98, 811 MT in 1998-99, 106 MT in 1999-00, 505 MT in 2000-01 and 176 MT at the end of
January 2002.  The closing stock gradually reduced from a high of 1219 MT in 1997-98 to 106 MT in
1999-00 before rising to 505 MT in 2000-01 and then again declining to 176 MT at the end of
January 2002.
(e) Employment
The domestic producers have submitted that at no point of time the plant could be operated at
more than 36 per cent plant capacity, which has led to a sense of insecurity and loss of employment of
around 270 personnel – 160 officers and about 110 from the staff cadre, over the last five years.
(f) Productivity
The productivity of TPL for ECH in MT per employee was 29.95 MT in 1996-97.  It declined
to 19.58 MT in 1997-98 and to a mere 7.93 MT during 1998-99 and 1999-2000.  However with the
increase in production, the productivity has increased to 32.21 MT in 2001-02.  As regardsproductivity per unit capital employed, it declined from 28.54MT/crore of Rs. In 1996-97 to 17.88 in
1997-98, 6.89 in 1998-99 and to 6.57 in 1999-2000.  It increased to 24.84 MT/crores of Rs.  In 2000-
01 but again declined to 19.92 MT/crore of Rs. In 2001-02.
(g) Profitability
TPL have been selling ECH at a loss.  Their sale realization is below the cost of production
and hence they are incurring losses.  Over the y ears their cost of production of ECH was as under:
Table 3
Year Cost of Production
(Rs. MT)Sales realization
(Rs.MT)
1996-97 1,33,114 58426
1997-98 1,21,734 65531
1998-99 2,71,020 67341
1999-2000 3,36,615 66769
2000-01 1,39,906 75363
2001-02 1,11,673 65107
TPL has incurred losses on their ECH production.  The year wise losses were Rs. 26.02 crores
in 1996-97, Rs. 18.52 crores in 1997-98, Rs.16.85 crores in 1998-99, Rs.21.02 crores in 1999-00,
Rs.26.08 crores in 2000-01 and Rs.27.25 crores (un-audited) in 2001-02.  The losses which initially
declined in 1997-98 and 1998-99 as compared to previous year have started increasing from the year
1999-2000 onwards and reached to a peak of Rs. 27.25 crores in the current year.  Even with higherproduction and higher sales in 2000-01 and 2001-02, TPL have incurred higher losses in these years.
From the above analysis, it is observed that TPL suffered serious injury as reflected by a
significant overall impairment in their performance in the years 1998-99 and 1999-2000, when theirG/SG/N/8/IND/11
Page 11
production dipped to a low of 951 MT consecutively for two years with domestic sales touching to the
lowest of 1241 MT in 1998-99 and remaining at  1296 MT in the next year.  Their capacity utilization
also dropped to a bare 9.51 per cent during this period and they incurred heavy losses of about
Rs. 38 crores during these years on their ECH oper ations.  Apprehending the onslaught of imports,
TPL had sought safeguard protection in the year 1998-99 and had worked out an adjustment plan foritself involving various measures, including setting up of PAPL.  These steps did improve their
performance in the subsequent years i.e. 2000-01 and 2001-02 but as no safeguard protection was
given to them, the imports of ECH continued unabated with 4294 MT landing into India in 2000-01
and 4971 MT up to January 2002.  With the setting up of PAPL, TPL were able to increase their
protection, capacity utilization productivity and domestic sales as compared to the previous year but
the continued threat of serious injury loomed large on them in the shape of loss in productivity in
terms of capital employed, stagnant domestic production, capacity utilization and sales not keepingpace with the increase in apparent domestic consumption with increased losses of Rs.26.08 crores
incurred in 2000-01 and Rs.27.25 crores (un-audited) in 2001-02, i.e. a total loss of Rs. 53.38 crores
in 2000-01 and 2001-02 as compared to Rs. 37.87 crores in 1998-99 and 1999-2000.
Cause of Injury
The table below shows domestic sales (excluding domestic sales for export production on
deemed export basis) of ECH by TPL, imports of ECH and the shares of domestic production and
imports in Apparent Domestic Consumption (domestic sales + imports):
Table 4
Year Domestic
sales
(MT)Imports
(MT)ADC
(MT)Share of
domestic
sales inADC %Share of
imports in
ADC%
1996-97 1785 761 2546 70.1 29.9
1997-98 1389 1931 3320 41.8 58.2
1998-99 1241 2933 4174 29.7 70.3
1999-00 1296 4614 5910 21.9 78.1
2000-01 1739 4294 6033 28.8 71.2
2001-02
(up to
January)1826 4971 6797 26.86 73.14
From the data tabulated above, it is observed that TPL had a market share of 70.1 per cent in
the Apparent Domestic Consumption (ADC) in 19 96-97, which declined to 41.8 per cent, 29.7 per
cent and to21.9 per cent in 1997-98, 1998-99 and 1999-2000 respectively.  The share lost by the
domestic producers was captured by the imports, which increased  from 29.9 per cent in 1996-97 to
58.2 per cent in 1997-98, 70.3 per cent in 1998-99 and to a high of 78.1 per cent in 1999-2000.  Withthe setting up of the Joint Venture Company PAPL, the share of domestic producers of ECH
improved marginally to 28.8 per cent in 2000-01 before declining to 26.86 per cent in 2001-02, with
the share of imported ECH falling marginally to 71.2 per cent and again rising to 73.14 per cent
respectively during this period.
It is observed that the injury to the domestic producers of ECH has more prominently
manifested itself in the form of losses incurred by  them, particularly so during the most recent period
i.e. 2000-01 and 2001-02.  In this regard it is observed that ECH was imported into India during the
period 1996-97 to 2001-02 (up to January) at prices as mentioned below in the table:G/SG/N/8/IND/11
Page 12
Table 5
Year CIF Import Prices
in US$/MTCIF Import Prices in
Rs./MTLanded price (CIF
+import duty)
1996-97 1528 54077 71382
1997-98 1235 46681 58352
1998-99 1242 51075 63844
1999-00 1059 45621 58167
2000-01 1318 59483 75841
2001-02(up to January)1090 43691* 54057*
*Based on Customs Data
TPL has stated that they sell ECH in the domestic market keeping in view the landed price
parity and that due to steady decline in import pric e, they were forced to reduce their selling prices
resulting into financial losses to them.  It is a matt er of fact that TPL have been selling ECH at prices
much below their cost, resulting in financial losses to them.  ECH is importable into India without any
quantitative restrictions.  As such, the landed price of imported ECH governs the domestic market
price since it provides the comparative bench mark for the buyers to make their buying decisions.
It is also a matter of fact that the CIF import price of ECH have steadily declined.  In 1996-
97, the CIF import prices in US$/MT were on an average 1528, which thereafter declined to 1235,
1242 and 1059 in 1999-2000 before rising to 1318 US$/MT in 2000-01 and again declining to
US$1090 per MT in 2001-02 (up to January).  The increase in imports coincides with this decline inprice.  In 1996-97, the imports were 761 MT, which increased to 1931 MT, 2933 MT and peaked to
4614 MT in 1999-2000 with the lowest average CIF price of 1059 US$/MT.  By the year 1998-99 and
1999-2000, the domestic production was reduced to a ba re 951 MT per annum.  Having almost wiped
out the domestic production, the import prices increased to 1318 US$/MT but as the domestic
production was raised to 3620 MT in 2000-01, which was mainly on account  of setting up of PAPLand their buying support extended to TPL, the impor t prices again have come down to almost their
lowest level at 1090 US$/MT in 2001-02, threatening the domestic production of ECH.
It has been argued by some of the interested parties that CIF price of imported ECH in US$ is
of no relevance to TPL as their consumers have paid for the material in Indian rupees and, therefore,import price in Indian rupees alone is of relevance both to the consumers and TPL.  In Indian rupees,
the import price has increased by about 20 per cent in 2001-02 as compared to Rs.45621 PMT in
1999-2000.  TPL were neither selling reasonable volume in the past nor intended to sell even when
the prices were very substantially higher, for instance in 2000.  Such being the case, they submitted
that decline in prices is not relevant to TPL.
I am afraid this argument is wholly untenable.  The petitioners have set-up a plant with a
capacity of 10,000 MT per annum for the manufacture of ECH at a huge investment.  They have not
set up this plant for idling.  In fact no manufacturer can be expected to set-up the plant without any
serious intention of supplying the material to its customers.  The fact of the matter is that PAPL
started buying material from TPL somewhere in 1999.  Prior to that TPL was supplying ECH only to
other domestic buyers but their sales to them kept on declining year after year i.e. from 1785 MT in1996-97 to 1389 MT in 1997-98, 1241 MT in 1998-99 and to a mere 100 MT in 1999-2000,
coinciding  with the decline in landed prices  of imported ECH, which came down from Rs.71382/MT
in 1996-97 to Rs.58167 per MT in 1999-2000.  Both at the end of 1997-98 and 1998-99, they carried
inventory of 1219 MT and 811 MT respectively.  In the wake of these facts, it cannot reasonably beG/SG/N/8/IND/11
Page 13
argued that TPL did not want to supply material to its buyers.  They had all the reasons to explore all
possibilities to sell off their material to buyers.
Some of the parties have stated that the quality of ECH manufactured by TPL  was not up to
the mark and that the imported ECH was of a better quality for manufacture of epoxy resins ofdifferent grades.  In this regard it is observed that TPL is an ISO 9002 accredited company.  They
have claimed that their product conforms to international standards set for ECH.  A copy of
characteristics of ECH manufactured by TPL and the imported ECH was also produced by the
applicants which revealed that their product is fully compatible with the imported ECH with regard to
various quality parameters.  TPL are in the business of ECH for the last six years and ECH
manufactured by them undergoes stringent quality checks before it is sent to the customers.  Samples
are tested at every stage of production starting from  raw materials to the finished product.  They have
been supplying ECH to PAPL who manufactures e poxy resins for export purposes and to the
pharmaceutical  industry who are extremely quality conscious.  In view of this it is considered that the
quality of ECH provided by TPL was not the cause for increased imports.
One factor that has been pointed out by some of  the interested parties is the assertion of the
Directors of TPL in their Balance Sheets that they restricted supplies of ECH to remunerative
markets.  I see nothing in  this assertion that will support the claim that TPL refused supplies of ECH
to their buyers.  Obviously TPL could not have been expected to keep on producing ECH and sell it at
heavy losses, when they were already carrying on inventories and were not able to sell even the small
quality of ECH that they produced.
As observed above, the reason for the domestic buyers to source their requirements of ECH
though imports appeared to be the cheaper prices of imports.  In this context it is also important to
observe that in the year 2001-02, the imports of ECH have increase from 1102 MT in the First Quarter
at an average CIF price of Rs.53935/MT to 1232 MT in the Second Quarter at an average CIF price of
Rs.45098/- MT and to 1905.6MT in the Third Quarter at an average CIF price of Rs.38954/ MT.  In
January 2002 731.5 MT of ECH was imported at an average CIF price of Rs. 38219/MT.  It is then
observed that the quantum of ECH imports has been increasing with the declining prices.
It has been argued by some of the parties that landed price of ECH imported in India showed
an upward trend in 2000-01, providing a better opportu nity to TPL to recover their costs.  In this
regard I observe that the factors that influenced the prices of imported ECH must have also impactedupon the domestic production of ECH and, therefore, an increased CIF price of imported ECH does
not necessarily mean that it provided an opportunity to TPL to improve their sales.  As a matter of
fact, all along TPL’s cost of production has been mu ch higher than the landed price of imported ECH
and they had been trying to sell ECH in domestic market keeping the landed price parity in view.  An
important aspect tilting the decision to procure ECH in favour of the imported material, however, hasbeen the long credit periods between 90-120 days associated with the imports.  As a sequel TPL also
was forced to extend such facility to their buyers affecting their liquidity position.  The problem was
compounded by suspension of credit terms by IOC, Mathura on Propylene supplies.  Another aspect
worth noting is that  in a falling market regime the domestic buyers expect prices to be fixed based on
expected landed price parity to prevent any further bookings.  Besides, spot prices most often tend tobe significantly lower than contractual prices, which has a direct bearing on domestic prices.
It has been argued by some parties that if the cause of injury to domestic producers was
cheaper imports it does not hold good any longer as the import prices of ECH are likely to go up due
to increase in the prices of raw materials Propylene and Chlorine and it has been suggested thatdecision to impose safeguard duty may be taken on the basis of prevailing international  prices.  In
this regard it is observed that the current CIF prices of ECH cannot be the basis for arriving at a
decision since post investigation price have no bearing on the prices prevailing during the period
under consideration.  The import prices may have increased due to various factors which would alsoG/SG/N/8/IND/11
Page 14
influence the domestic cost of production.  It is neither practicable nor desirable to base the findings
on post investigation prices.
It has also been claimed that the reason for the woes of TPL is loss of its export market that
has declined and that TPL made no serious efforts to improve their export performance and not theimports of ECH into the country.  It has also been further stated that since TPL has been exporting in
the past rather than supplying the same to the Indian consumers the production of ECH to such an
extent is not available to the domestic consumers.  In this regard it is observed that TPL has
specifically mentioned in their application that in spite of the constraints they were forced to export
ECH  at low realization to improve their capacity utilization and to bring down cost.  It is important to
keep in mind that the production line of ECH is common to both domestic consumption and export
market.  A domestic industry that was not able to compete in the domestic market could hardly beexpected to compete internationally.  The injury caused by imports had its effect also on the export
performance of TPL.  However, TPL did supply 1500 MT of ECH to PAPL in 2001-02 on deemed
export basis under DEEC scheme,  which are considered as exports without the goods leaving the
Indian shore.
In conclusion it is observed that the domestic producer of ECH have suffered serious injury
and face further threat of serious injury caused by increased imports of ECH.
Positive Adjustment
The domestic producer has submitted details of efforts being made by them for making a
positive adjustment to meet with the situation of competition offered by the increased imports.  The
applicants have proposed to take the following measures to bring down their cost of production to
improve their competitiveness over a period of 3 years namely :
(a) Build an international sized terminal at Ennore Satellite port to handle a variety of Petroleum
products/other chemicals which will solve their problem of high demurrage costs incurred by
them for importing Propylene at Cuddalore and the high transportation cost for bringing the
domestic Propylene over long distances. This they expect to be completed by the year 2004.
The cost of demurrage and higher transportation cost which could be saved have been worked
out by them  to be approximately Rs 3000 - 5000/MT on ECH.
(b) With a view to ensuring steady availability of Chlorine which is one of the main raw
materials for Epichlorohydrin manufacture they have acquired the Heavy Chemicals division
of SPIC and further they have planned to set up captive power plant in the premises of the
Heavy Chemicals Division with the sole intention of reducing Chlorine cost which in turn
would help ECH unit achieve cost competitiveness .  The Chlorine transfer price which ispresently Rs 4500/MT could be reduced to Rs 15 00/MT over the next 3 year period by way of
installing the captive power plant.
(c) Sourcing Lime which is one of the raw materials at lower cost and further interact with
indigenous Lime producers for improving its purity to minimum of 90 per cent which wouldsolve process related problems and reduce cost.
(d) The accelerated depreciation policy of TPL would ensure that the depreciation cost is written
off by 2004-05 which would enable them to be highly competitive compared to that of the
other developed nations.  It has been stated  that the overall Cost of Production of Rs111,673/MT during 2001-02, shall over the four year period ( in the year 2005-06) will get
reduced to Rs 50,423/MT.G/SG/N/8/IND/11
Page 15
(e) Installation of new mixer for Allyl Chloride production in ECH plant for reduced
consumption of raw materials and for increasing the on stream efficiency.
Some of the interested parties have expressed doubts about the feasibility of the adjustment
plans and the likely quantum of savings in cost of production of ECH.  With regard to the accelerateddepreciation of TPL it has been stated that the maintenance cost in a chemical plant that too in a fully
depreciated plant would be quite high and such costs would more than off set the reduction in the
form of lower depreciation.  Some of the interested parties have stated that the adjustment plans
envisaged by TPL neither quantified the associated investments nor quantifies the likely benefit.  The
adjustment plan are mere statements, unsubstantiated and unaccompanied with necessary evidence.
Some of the interested parties have claimed since TPL has commissioned the captive power plant  and
it is already operational, the cost of chlorine should have already come down and, therefore, thiscannot form part of their future adjustment plan.  Similarly with regard to Allyl mixer plant it has
been argued that the same has already been installed and benefits must have started accruing and,
therefore, this also needs to be ignored.
The adjustment plans furnished by the applicants have been examined.  The cost reduction
efforts on account of accelerated depreciation, though it may be in accordance with generally accepted
accounting principles and the company may be entitled for such benefits but as the same cannot be
recovered through product price, it  needs to be excluded for the purpose of arriving at the cost of
production and only normal rate of depreciation is being allowed in recommending the quantum of
safeguard duty.
To reduce the power cost, steps have already been taken by TPL towards setting up of captive
power generation facility.  The facility has already been installed and expected to be commissioned by
June 2002 which would get stabilized over a period of next two years.  This would also bring down
considerably the maximum demand charges gradually over a period of time, that are being paid byTPL  to the Tamil Nadu Electricity Board, and as a sequel chlorine cost could be reduced
considerably.  The Allyl Chloride Mixer has been commissioned in March 2002 after the notice of
initiation for safeguard investigation was issued. Efforts are being made by TPL to stabilize the
reactor for efficient consumption norms which would depend to a considerable extent on the capacity
utilization.  All this is an ongoing exercise, which would continue for increasing the efficiency and
onstream factor to the optimum.  As regards the terminal at Ennore, TPL has promoted a company
Van Ommeren Mac Tank Terminals now known as  Vopak Sical Terminal Limited with equity
participation by Vopak (40 per cent), Sical (5 per cent), TPL (35 per cent) and TIDCO (11 per cent).
TPL have proposed setting up of 32 tanks for handlin g a variety of petro-chemical products and have
already acquired about 30 acres of land for the project.  They have obtained necessary  clearances
from the Tamilnadu Pollution Control Board.  The raw material and finished product traffic figures of
the TPL project have been factored in the overall tr affic figures of the first corporatized port in the
country.  The port has already started commercial operation since June 2001 handling Coal for the
thermal power plant set up by TNEB.  SICAL a sister company of  TPL is the sole handling agency
for coal.  Phase II of the port envisages setting up of 4 berths, 3 for liquid cargoes and one for coal.
The port authorities have already obtained, in principle clearance from the Government of India for
these projects.  The port management have called for an expression of interest for a marine liquidterminal at Ennore.  TPL have submitted their documents for the same which is expected to be
finalized by end of September 2002.  The Ennore port expects this to be operational by 2004. TIDCO
has also proposed a petrochemical park adjacent to the port and have already acquired about 2500
acres of land and a number of prospective players are in talk with TIDCO.   There is a possibility of a
co-operative effort on this front between TPL & TIDCO. After due analysis of the restructuring  plansand keeping in view the possibility of implementation of the plans , it is considered that the domestic
producer would need protection for a period of three years  to prevent occurrence of serious injury and
to make positive adjustment to the competition offered by imports.G/SG/N/8/IND/11
Page 16
Public Interest
Some of the parties have argued that imposition of safeguard duty would not serve any public
interest.  On the contrary imposition of safeguard duty would severely prejudice the public interest as
a number of end user industry may close down.  In this regard, it is observed that the expression
‘public interest’ does not cover in its ambit consumer interest alone.  It is a much wider term, which
covers in its ambit the general social welfare taking  into account the larger community interest.  While
the imposition of safeguard duty may result in increased cost of imported ECH in the hands of buyers
and, therefore, it may also effect the end products manufactured therefrom, it is important to keep in
mind the objective of imposition of safeguard duty.  The purpose of imposition of safeguard duty is to
provide time to the domestic industry to make positive adjustment to meet with the new situation of
competition offered by the increased imports.  The imposition of safeguard duty, for the period and tothe extent just adequate, would, therefore, not only minimise the adverse effect, if any, for the
customers but also allow them a wider choice to source their requirements and at competitive prices.
The domestic producers who have set up plants with huge public investments provide employment to
a large number of people and make valuable contribution to the national economy.  ‘Safeguard duty’,
which would enable the domestic producers to survive in the face of competition offered by theincreased imports, will, therefore, also be in the long-term interest of the buyers of ECH  as well as of
the buyers of products manufactured therefrom.  It is, therefore, considered that imposition of
safeguard duty on ECH will be in public interest.
Some of the parties have argued that the applicant being the sole producer of ECH, imposition
of safeguard duty would lead to a monopolistic situ ation and TPL would exploit the domestic market.
It is appropriate to observe here that the domestic producer has a total capacity of 10,000 TPA as
compared to substantially higher capacity of expo rters.  The imports of ECH are allowed into India
without any quantity restrictions.  In the light of unrestricted imports it is not correct to presume that
TPL enjoyed/enjoys any monopoly particularly when imports accounted for about 70 per cent, on anaverage, of the apparent domestic consumption during the period 1998-99 to 2001-02 (up to January).
The law also does not envisage that interest of a single producer should not be protected even if it
rightly deserves to be protected.  Imposition of safeguard duty is not aimed at encouraging
monopolistic practices but at protecting the interests of domestic producers, if increased imports cause
or threaten to cause serious injury to them so as  to allow them time to make positive adjustment with
the new situation of  competition offered by the increased imports.
Some of the parties have argued that TPL is not capable of meeting with the domestic demand
of ECH and hence any imposition of safeguard dut y would benefit only PAPL, to whom TPL are
committed to supply ECH.  It has been claimed that  the capacity created by TPL is never tested in
terms of actual production on continuous basi s and the maximum achieved production can only be
considered as the capacity of TPL.  In this regard, it is observed that the domestic producer hasfurnished documentary evidence of their capacity on a confidential basis.  They have stated that
production can be stepped up in a short span of time if the opportunity is afforded to them to run the
plant at higher load factor and meet the demand.  I do not agree that in the circumstances of this case,
where domestic producers were not able to sell the material to buyers only the quantity produced
should be considered the capacity of the plant.  In the absence of any evidence made available to thecontrary, no ground exists to hold that they do not have adequate capacity to meet the domestic
demand or to hold that the imports were necessitated because TPL was not in a position to cater.
Further, it is observed that TPL has set up a plant with installed capacity of 10,000 MT per
annum.  As verified, TPL achieved the highest production of 547 MTs in a month and 28.14 MT in asingle day.  Accordingly, there is no doubt that they can produce 6500 – 8500 MT per annum of ECH.
As against this the Apparent Domestic consumption of ECH during the last three years i.e. 1999-
2000, 2000-01 & 2001-02 (up to January) has been of the order of 6000 to 8000 MT per annum,G/SG/N/8/IND/11
Page 17
including the requirement of PAPL.  In view of the a bove, I observe that it will not be fair to hold that
TPL are not able to cater to the domestic requirements of ECH.
It may also be pertinent to mention here that consequent to Ciba India Pvt. Ltd. (CIPL)
divesting their status in PAPL in favour of Vantico Performance Polymers Pvt. Ltd., TPL had to agreeto waive the right of first refusal in respect of shares sought to be sold, cessation of existing supply
agreement for supply of ECH to PAPL to be superseded by  a new supply agreement and release
CIPL from its obligation and duties subsisting under various agreements.  In consideration of this
premature termination of the contracts and for surrendering  the above rights a sum of Rs.630,248
thousands was settled by CIPL as compensation to be paid to TPL.  Besides PAPL has opposed
imposition of safeguard duty on ECH as a consumer of ECH and being the largest manufacturer of
epoxy resins although PAPL is jointly owned by TPL alongwith M/s. Vantico International.  There is,
therefore, no ground to presume that interest of TPL and PAPL coincide in seeking safeguard duty
imposition on ECH.
It is, therefore, considered that imposition of safeguard duty on ECH will be in Public
Interest.
Provisional Safeguard Duty
Since on completion of the investigation final findings have been made, it is not considered
necessary to recommend any provisional measures in the present case.
Share of Countries in Export to India
As per verified information, the share of count ries in export of ECH to India during 2001-02
(up to January) was as under :
Country/territory Quantity
(MT)%age
share
Belgium 618 12.43
Germany 1109 22.31
Japan 364 7.32
Korea RP 1515 30.48
United States 1365 27.46
Total 4971 100
CONCLUSION AND RECOMMENDATION
In view of the findings above, it is concluded that increased imports of ECH into India have
caused and further threatened to cause serious injury to the domestic producers of  ECH and it will be
in the Public interest to impose safeguard duty for a period of three years on imports of ECH intoIndia.
In arriving at the amount of safeguard duty that would be adequate to prevent serious injury to
the domestic industry and to facilitate positive adjustment, the duly verified cost of production for
ECH for the period 2000-01 (audited accounts) & for 2001-02 (un-audited), after making suitableadjustments and providing only normal depreciation as against accelerated depreciation and the
probable cost of manufacture at optimum capacity (Confidential) being more reflective of the true
cost has been taken into account.  The domestic producers have claimed a certain amount of profit on
the basis of expected return on capital employed etc. which is considered to be on the higher side and,G/SG/N/8/IND/11
Page 18
therefore, a lower amount of profit (confidential) based on the weighted average cost of production
has been considered appropriate and allowed.  Similarly, the C.I.F. import prices of ECH also have
been considered on verified weighted average basis for the year 2001-02 (up to January).
Adjustments have been made in the C.I.F. import price for credit terms and landing charges on an
average basis.  Change in the applicable rate of customs duty, if any, has been taken into account inworking out the landed price of imported ECH.  Besides, the extent of benefit flowing from the
restructuring of domestic industry has also been ke pt in view in determining the amount of safeguard
duty and the amount so recommended has been restricted to the minimum that would be adequate to
remove injury to the domestic industry and to faci litate them to adjust to the import competition.
Considering the need to progressively liberalize the safeguard duty in order to facilitate
positive adjustments by the domestic industry, it is recommended that safeguard duty be imposed onimports of ECH into India at the rates specified below on ad valorem  basis for a period of three years
as under being the minimum necessary for the protection of the domestic industry from the serious
injury caused and further threatened to be caused by the increased imports of ECH.
Period Level of Total
Protection
Recommended (%)Existing Duty
(%)Safeguard Duty
Recommended
(%)
(2-3)
(1) (2) (3) (4)
First Year 25+22 22
Second Year 25+15 15
Third Year 25+0925%
09
(R.K.Gupta)
Director General (Safeguards)
__________