The product prices have declined by around 30-40 per cent over the past one year. Raw material prices too have declined but to lesser extent. Both this have affected the overall productivity of Indian companies.

Exports of value-added products by manufactures in some of the south east Asian countries too has been one of the reasons for this situation. Countries like Japan and Korea, which earlier sold their products to the USA, Europe and South Africa, now divert their products to the country, for, exporters of these countries find India as a safer bet as there are few cases of defaults by Indian companies.

Because of some of the sloppy anti-dumping laws, production of some of the important products (like phosphorus) has been stopped and are now being imported.

Drastic reduction in customs duty is the single most important factor that has affected the industry. It has been reduced far below the requirements of the World Trade Organisation (WTO). As per the Confederation of Indian industry's (CII) report on WTO, the tariffs have to be 40 per cent by 2000-01 and are to be achieved in equated installments beginning 1995. However, basic custom duty has been reduced to 30 per cent in 1997-98 itself.

The ICMA has recommended that the existing duty structure on chemicals be maintained. An additional duty of 40 per cent on basic duty be introduced (equivalent to 4-12 per cent depending on the basic duty that ranges from 10-30 per cent). This will provide counterbalance to steep decline in the international prices and would also increase governments' revenue.

In order to protect the local manufacturers here from falling international prices, the association has recommended that a safeguard duty of 25 per cent of the CIF value be imposed if an applicant establishes that there is a drop in international price of more than 20 per cent during the previous 12 months. The duty should be in place till the recessionary conditions abate.

The Special Additional Duty (SAD) introduced last year, should be levied on all imports. (There has been a huge amount of duty evasion on this front, as traders have set up offices in zero sales tax areas.) The SAD should be refunded to those traders who furnish proof of having paid the sales tax.

Import duty on both capital goods and catalysts (not manufactured in India) should be reduced to a maximum of 10 per cent. Customs duty on energy inputs like fuel oils, LSHS should be reduced to nil.

The excise duty on chemicals should be reduced to 10 per cent to stimulate demand. Modvat has to be restored to 100 per cent as the chemical industry is a multi-stage industry where the impact of 95 per cent Modvat is severe. Further, excise duty paid on chemicals, equipment used for safety, occupational health be made modvatable. Excise paid on all fuel be made modvatable. Most importantly VAT system should be introduced.