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Safeguard investigation concerning imports of Acetylene Black into India — Final Findings - SG/INV/1/1997 - Safeguard DutyExtract Notification No. SG/INV/1/1997 Dated 16-6-1998 Subject : Safeguard investigation concerning imports of Acetylene Black into India - Final Findings. 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 Director General (Safeguards), hereinafter referred to as DG, notified Preliminary Findings in the Safeguard investigation concerning imports of Acetylene Black (hereinafter referred to as AB) vide Notification No. SG/INV/1/97, dated 27th January, 1998, published in the official gazette on 4th February, 1998. 2. A copy of the said Notification was sent to all known interested parties to make their views known on these Preliminary Findings by 9-3-1998. A copy of the Notice was also sent to the governments of the exporting countries through their embassies in New Delhi. 3. Request for extension of time to submit their responses was made by the following parties : (i) M/s. Panyam Cements and Mineral Industries Ltd. (ii) M/s. Senka Carbon Pvt. Ltd. (iii) M/s. Tecil Hydro Power Ltd. (iv) Economic and Commercial Counsellor, Embassy of Peoples Republic of China. Their request was considered and an extension of time up to 24-3-1998 was allowed. 4. Replies to the notice dated 27-1-1998 were received from the following parties :- (a) All the domestic producers through their advocates. (b) All the importers through their advocates. (c) Exporters/Governments of exporting countries : (i) High Commissioner, Republic of Singapore. (ii) Embassy of the Peoples Republic of China. (iii) MCCI Corporation Philippines. (iv) South African High Commission as convenor for six countries involved namely Belgium, Peoples Republic of China, Japan, The Philippines, Singapore and South Africa. (v) M/s. Denki Kagaku Kogyo Kabushiki Kaisha (DENKA). (vi) M/s. Denka Singapore Private Ltd. (DSPL). (vii) Embassy of France. (viii) Embassy of Japan. 5. Verification of information deemed necessary for the investigation was conducted by a team of officers and to this end investigations were carried out by a team of officers at the premises of the domestic producers and some of the importers/battery manufacturers in March, 1998. Outcome of the verification was communicated to the concerned parties. 6. A Public Hearing was scheduled for 12-5-1998, which was postponed and held on 26-5-1998. Following parties attended the Public Hearing : (i) All the domestic producers through their advocate. (ii) All the importers through their advocate. (iii) M/s. Denki Kagaku Kogyo Kabushiki Kaisla (DENKA) through advocate. (iv) M/s. Denka Singapore Pvt. Ltd. (DSPL) through advocate. (v) M/s. Karbochem, South Africa through their local agent. (vi) South African High Commission. (vii) Embassy of Japan. (viii) Republic of Singapore. Evidence presented orally at the time of the Public Hearing was asked to be submitted in writing so as to reach the office of DG on 3 June, 1998. Parties were asked to collect copies of written submissions of other parties from the office of DG on 4 June, 1998 and to submit rebuttals if any by 10 June, 1998. (B) VIEWS OF THE DOMESTIC INDUSTRY 7. The domestic producers have made the following main points : (i) Existence of Dry Cell Battery Manufacturers Association (ADCBM) is not known to them and they were not aware whether it was a recognised body to make a representation. ADCBM neither figured in the application filed by the domestic producers of Acetylene Black nor did it enroll itself as an interested party. Despite this situation, DG has given cognizance to the issues raised by ADCBM. (ii) The injury analysis for 1996-97 and 1997-98 dealt by ADCBM are not accurate reflection of the situation prevalent in the AB industry. The drop in production level and sales particularly in 1997-98 is only due to indiscriminate import of AB, unethical price under- cutting by the exporting countries and the insistence of the indigenous dry cell battery manufacturers in creating a price war between imports and indigenous sources, revised schedules and reduced quantum of offtake under the threat of continued imports if the domestic industry did not reduce their prices to uneconomical levels of operation. (iii) There was no question of supply restraint from the indigenous sources despite power situation in Kerala and depressed performance of the industry in 1996-97. The domestic industry was more grievously affected in 1997-98 due to heavy importation of AB at unrealistic prices undercutting the local market by the overseas suppliers. (iv) The effect of heavy importation of AB which began in 1996-97 and continued unabated has affected the performance of AB manufacturers particularly in 1997-98 (second half) when the plants were being operated intermittently with reduced production below the economic level of operation. Reduced production and sale of AB at the slashed down prices of procurement offered by Indian Dry Cell Battery Manufacturers (IDCBM) is gravely affecting the industry s financial results. (v) During the quarter Oct.-Dec., 1997 production of AB in Panyam was only 296 MT as against 937 MT during the period Apr.-Sept., 1997. By Sept., 1997 Panyam had a huge unsold stock due to lack of confirmed orders/dispatch instructions. (vi) Despite power problems in Karnataka and Kerala, Panyam whose installed capacity was 1800 TPA and was expected to produce at 80% efficiency, in fact produced as much as 1949 MT in 1996-97 but could sell only 1786 MT due to reduced level of offtake. (vii) Shut down of the Panyam plant for one month during Sept., 1996 was for annual maintenance, a common feature in any manufacturing plant. (viii) Senka s sale of AB was only 404 MT, 407 MT and 630 MT (including job work) for the years 1994-95, 1995-96 and 1996-97 respectively against their installed capacity of 600 TPA, 600 TPA and 900 TPA respectively. In the year 1996-97, Senka was able to increase its capacity utilisation only because M/s. Indo-National Ltd. (INL thought it prudent to buy more AB from Senka rather than import and even arranged for the supply of Calcium Carbide for Senka so that they could produce AP on a conversion basis. M/s. Eveready Industries and M/s. Lakhanpal could have also utilised the capacity still available with Senka particularly when Tecil was in distress due to reasons beyond their control. In 1997-98, M/s. INL also discontinued job work from Senka and switched over to importation. (ix) M/s Geep have repeatedly failed to lift the material ordered by them as per the given schedule. They also insisted on extension of 30 days credit and Senka which had offered them the same had to make continued follow up to get the payment. These circumstances led them to infer that order was being placed on them as a buffer only to meet the vagaries in the supply/arrival of imported AB. (x) Tecil had to face power cuts and labour problem for only a short period of time in 1996. The power shortage and high percentage of power cuts to the Carbide industry was for a short period in 1996-97 and the situation became normal in Nov., 1996. (xi) The contention that the Indian Acetylene Black Manufacturers (IABM) were unable to satisfy the requirements of IDCBM resulting in the import of AB is not true as neither Senka nor Panyam were approached by IDCBM with orders to supply and their was no case of rejection or refusal to supply against an order. It is true that the IABM with their AB manufactured from traditional route were not able to meet the price of AB from the overseas suppliers. Cutting down of the indigenous procurement by IDCBM has led to uneconomical levels of operation by the IABM. (xii) M/s. Geep had initially in 1990 rejected Senka s first supply of AB satisfying the Indian Standard Specification fully. They took long time to return the material which was found to be perfectly in order and was sold to other customers. They were told that the final finishing of Senka s material was based on low density being the requirement of their main customer M/s INL. Geep had two manufacturing plants, one at Allahabad and the other at Mysore. While Allahabad Plant did not raise any quality problems, towards the end of 1996 Mysore Plant complained about Senka s AB quality as not meeting with their specifications. Thus, it seemed that within the same company, each plant manufactures identical products, albeit with different input acceptance level, which is unlikely. It is more likely that Geep was committed to imports and wanted some excuse for not purchasing from domestic industry. They reduced off-takes due to build up of stocks of imported AB. (xiii) Tecil too had stabilised their quality of production as would be seen from a reference to the book titled Technology in India Acetylene Black Industry - a report prepared under the National Register of Foreign Collaborations - Government of India, Department of Scientific and Industrial Research-August 1988 vide Page 22, Page 26, Para 3.5 and page 68, Para 6.6. (xiv) Cost of production of AB was brought down by Tecil from ₹ 1,27,576 in 1996-97 to ₹ 1,10,146 by reducing the consumption of power in the manufacture of calcium carbide. (xv) The manufacture of Calcium Carbide has been found to be cost effective by Panyam and Tecil despite marginally higher rate of power consumption. Senka are also purchasing Calcium Carbide from a renowned source in South India at a reasonable price. (xvi) Tecil is in the process of putting up Hydro-power projects. Panyam and Senka are proposing to source Acetylene gas from the petrochemical complexes using natural gas for the manufacture of Ethylene in which Acetylene gas is released as a by-product. The argument that adjustment to competition is not feasible is unfounded. (xvii) The weighted landed cost (after port clearance) of AB had always been higher during 1994-95, 1995-96, 1996-97 except for the year 1997-98 which has resulted due to slashing of prices by overseas suppliers. The price level has come down during this period from $ 2400 per MT to $ 1700 per MT. (xviii) The contention of M/s. INL seeking price reduction to ₹ 95,000 per MT on the ground of increase in Zinc price is not tenable as Zinc prices have fallen drastically and its effect is expected to be felt during 1998-99. (xix) Panyam has stopped production after Jan., 1998. (xx) Imports have increased by about 1100% in 1996-97 and the trend of imports of AB continues in 1997-98 as the imports in 1997-98 rose to 1640 MT. The imports during the first six months of 1997-98 (April-Sept.) were 625.38 MT. (xxi) The sales of domestically produced AB has declined to 2001 MT in 1997-98 and the domestic producers have lost their profitability. (xxii) The domestic industry is in the process of restructuring. Senka and Panyam are exploring the possibility of manufacturing AB through hydrocarbon route instead of Calcium Carbide route and Tecil is trying to captively generate Hydro electrical power which should reduce the cost of production. (xxiii) The domestic producers have requested that the product exported from Belgium should not be excluded on the ground that it is described Conductive Carbon since commercially and technically it substituted AB. (xxiv) The labour and power problems were over lapping in Tecil. Once they commenced normal production in 1996 they carried huge stocks as offers made by them in writing were not accepted by the Dry Cell Battery Manufacturers. (xxv) The use of term dumping in the Safeguard application was in a generic sense and not in the technical sense of dumping. (xxvi) The Report of Department of Scientific and Industrial Research on the AB Manufacture in India is a 1988 Report and cannot be entirely relied upon in today s context as many parameters since then have changed. (xxvii) Tecil is a captive producer of Calcium Carbide and would therefore continue to manufacture AB from this route. (xxviii) Calcium Carbide and AB are two different products both manufactured domestically and the issues connected with Calcium Carbide should not be mixed up with the issue concerning AB. (xxix) The domestic producers of AB are not in a position to generate adequate resources to facilitate their restructuring unless Safeguard Duty is imposed on AB. (xxx) CIF pricing of exporters is same irrespective of the method of manufacturing i.e. through Petrochemical or Calcium Carbide route. No distinction on the basis of route, therefore, need to be made. (xxxi) Reduction in price of imported AB was the main reason for increased imports. (xxxii) The domestic industry has made plans to adjust their plants. Tecil is installing Ullunkal hydro-electric plant which is over 80% complete. Tecil has also entered into a collaboration with M/s. Kedab Engineering, Australia, for augmenting and modernising of the production facilities to enhance installed capacity to 3600 TPA. Senka and Panyam have collectively presented a plan to the Ministry of Chemicals Fertilisers to source acetylene from their refineries. They have also submitted a plan on confidential basis. (C) VIEWS OF THE USERS/IMPORTERS 8. The users/importers of AB have made the following main points : (i) AB has not been imported into India in such Increased Quantity in 1997-98 when compared with 1996-97 in absolute terms. The import in the first four months of 1997-98 was 250.57 MT and was less than the corresponding import in 1996-97 of 280 MT on proportionate basis. (ii) Since import as a percentage of domestic production has increased from 25.68% in 1996-97 to 29.54% in 1997-98, i.e. by only 4%, it cannot be considered as import of the article in such increased quantity. There has been no such increased import either in absolute terms or relative to domestic production, and the fundamental condition required for invoking Section 8B is not satisfied. Determination of the increased imports with reference to 1994-95 and 1995-96 has led to this erroneous conclusion. (iii) The injury analysis of production, capacity utilisation etc. have also been vitiated by the fact that these have been considered with reference to the years 1994-95 and 1995-96. As 1996-97 was the first year of imports of AB due to the problems faced by the domestic manufacturers of AB, the fall in production, sales, market share, etc. have to be studied only with reference to 1996-97 in 1997-98. (iv) Although the production of Acetylene Black by the domestic industry has fallen from 3570 MT in 1995-96 to 3275 MT in 1996-97, the production of Panyam increased from 1922 MT to 1949 MT from 1995-96 to 1996-97 even though Panyam had closed down for one month for maintenance purpose, Senka s production also went up from 440 MT to 630 MT in 1996-97 and the production of Oswal was higher at 221.65 MT in 1996-97 as against 206.25 MT in the previous year. Thus three of the four domestic producers of AB showed increase in production in 1996-97. It was only in the case of fourth producer namely Tecil that there was a fall in production from 1031.8 MT to 473.93 MT. The fall in production in Tecil was due to serious power cuts and workers strike. Fall in production in Tecil was, therefore, not due to the alleged increased imports. (v) The fall in capacity utilisation is mainly attributable to the drop in apparent demand in the first half of 1997-98 by 14%, and increase in installed capacity by about 6% and problems of inefficiency power cuts and labour faced by Tecil and not due to increased imports. The increase in the market share of imports from 21.8% in 1996-97 to 22.81% in 1997-98 i.e. 1%, cannot be regarded as serious injury resulting in significant overall impairment of the domestic industry. (vi) Injury to domestic industry is a self inflicted injury as they increased the installed capacity from 5300 MT to 5600 MT inspite of a low capacity utilisation. The causal link between increased imports and serious injury to the domestic industry is absent. (vii) The quality certificate received from M/s. INL by Senka were much earlier to the current period of investigation in 1997-98. The quality problem brought to Senka s notice by M/s. Geep in 1997 has not at all been dealt by the DG in his Preliminary Findings. The domestic industry has not taken any action to switch over from the Calcium Carbide route to the Hydrocarbon Route for the manufacture of AB as recommended by the Department of Scientific and Industrial Research in its report. The domestic producers have themselves stated that Senka will not be cost effective through the Calcium Carbide route. The question is also whether it was feasible for Senka as well as Panyam to get Acetylene in an efficient manner from any Petrochemical Industry. (viii) Oswal, the only producer using the Petrochemical route is operating at not more than 25% of their installed capacity. Their cost of production of AB is about ₹ 20,000/- lower than the other domestic producers. The current landed price of imported AB at existing rates of Customs duty compares favourably with the selling price of Oswal. Imported AB, therefore, did not influence the price of the indigenous manufacturers other than Oswal. (ix) The domestic producers of AB are complaining about dumping of Calcium Carbide, non-availability and high cost of power and have a built-in excess capacity which prevented them from achieving optimum capacity utilisation. Safeguard duty is not warranted if domestic industry cannot adjust itself to the competition. (x) The prices at which the import of the product is taking place should not at all enter into consideration in a safeguard action. (xi) The provisional safeguard duty recommended is about US $ 500 per MT or about 28% of the import price of US $ 1800. This is in addition to the existing Customs duty of 35% and thus takes the total levy to 63% nullifying the entire process of economic restructuring. The fair selling price should be worked out on the basis of cost of production of the efficient unit. (xii) The product exported from Belgium is not AB. It is Conductive Carbon, classified under 28030003 of ITC which is not produced from acetylene route and, therefore, should be excluded from the purview of the present investigation. (xiii) The increased domestic consumption from 3645 MT in 1995-96 to 3858 MT in 1996-97 i.e. an increase of 213 MT and Tecil losing their production of 558 MT, together accounted for 771 MT which explains the increase in quantity imported in 1996-97 over 1995-96. (xiv) There are four domestic producers of AB out of which 3 domestic producers in 1996-97 registered an increase in production and only one domestic producer namely Tecil suffered loss of production, sales etc. for reasons other than increased imports i.e. labour and power problems etc. This domestic producer alone cannot constitute the domestic industry as per the definition of the domestic industry under the Safeguard Law and, therefore, no action need be taken for imposition of Safeguard Duty. (xv) Availability of Acetylene from Hydrocarbon route is doubtful. Two of the domestic producers in the context of anti-dumping petition concerning calcium carbide have mentioned that there are no known manufacturer of acetylene in Petrochemical industry in India. Adjustment plan submitted by some of the domestic producers is, therefore, questionable. (D) VIEWS OF THE EXPORTERS/EXPORTING COUNTRIES 9. The exporters of AB/governments of exporting countries have made the following main points : (a) Karbochem : (i) AB producers in India have become uncompetitive as compared to overseas suppliers due to higher electricity price. (ii) Current rate of protection to the domestic producers against imports is sufficient since duties have been reduced from 85% in 1993-94 to the current level of 35% on CIF value and the domestic producers who had more than 97% of market share of AB up to 1996 still have 85% share during 1997. (iii) AB exports from Karbochem to India started in the later part of 1996 after the freight rate for a 40 feet container to Mumbaicame down from US $ 3600 in 1996 to the current rate of US $ 1050. The Rand US $ exchange rate also went up from R 3.63 per US to R 5.10 - a depreciation of 40%. (iv) Since 1992 Karbochem has also improved cost of production which has allowed it to increase its domestic market share. Karbochem has not extended any preferential pricing to the Indian market. (v) The cost of local raw materials i.e. electricity, lime and reductance have pushed the Indian producers of AB to a corner where they cannot compete with World class producers. (vi) SG duty on AB will lead Indian Battery Producers to increase the selling price of batteries in the local market causing increased imports of low quality batteries from China. (vii) The price of AB was reduced by Denka who had increased the capacity of the Singapore Plant to 12,000 MT and also continued the production in the Japan Plant. (viii) The price of AB in 1996 was US $ 1900 PMT @ IUS $= ₹ 32.05 and the present price is US $ 1800 PMT @ 1US $ = ₹ 41.75. The price has reduced as a result of drastic reduction in sea freight. (ix) AB is usually derived from Naphtha or Calcium Carbide and that the AB produced from Calcium Carbide is of better quality. (x) It is of utmost importance that the production cost of Calcium Carbide is very efficient so as to reduce the cost of production of AB. (b) MCCI Corporation : (i) The decline in production of AB in India is not due to increased AB imports. The prevailing power crisis coupled with high power tariffs in India made the supply of Calcium Carbide scarce and expensive resulting in reduction of production and inadequate supply of AB in the local market by the domestic producers hence the increase in imports. (ii) There is no deliberate intention of reducing the prices of AB imported into India and the same is based solely on market prices. Since international prices of AB have gone down MCCI has also reduced its AB price but MCCI prices are fair and reasonable. (iii) Imposition of SG duty on AB will adversely affect the Dry Cell Battery manufacturers by increasing their cost. (c) DENKA DSPL :- (i) The net increase of import should be taken only after deducting the increase of total consumption in India. The net increase of import of AB is attributable to increased demand of AB by the users of AB specially when domestic producers fail to meet the demand of dry cell battery manufacturers. (ii) Infrastructure problems such as power and labour and inefficiency of the domestic producers cause serious injury or threaten to cause serious injury to the domestic industry. (iii) Rate of provisional duty is unfair and unjustified. (iv) The marginal decrease in price of imported AB from US $ 2280 in 1996 to US $ 1970 in 1997 (CIF) was due to fall in international prices. (d) Embassy of the Peoples Republic of China did not make any specific submissions except asking for a list of Chinese exporters of AB in India as well as a list of Indian importers of AB from China. The information regarding all known importers/exporters etc. is already available in the application. (e) The Republic of Singapore wanted to be apprised of the developments and progress of the investigation and in their view imposition of provisional safeguard duty was unwarranted. (f) The South African Economic Office made the following points as convenor of six countries exporting AB to India. (i) Surge in imports is due to the fact that local producers of the AB were unable to fully supply the demand due to problems encountered by them on account of power cut, labour problems and obsolete production method whereby AB is produced from Calcium Carbide which is extremely energy intensive. (ii) Increased imports did not cause serious injury to local production as all manufacturers except Tecil increased their production during the year 1996-97. The reduced production of Tecil was due to labour and power problems and has nothing to do with the imports. (iii) Imposition of safeguard duty would render India s industry non-competitive internationally. (g) Embassy of France in India : (i) Seriousness of injury did not appear to be established as the market share of the Indian industry remains very high (close to 80%) and the local production remains stable over a considerable period. (ii) Significant price drop of imported AB occurred only after April 1997 while the increase of import started a year back. (iii) Indian industry suffers from over capacity of production and technological gap. (h) Embassy of Japan in India : (i) Among the four Indian producers who applied for safeguard measure, only one producer experienced decline of its output during the period examined. Under the circumstances, the consistency of the Indian Safeguard measure to Article 4(1) of the Agreement on Safeguards is doubtful. (ii) Determination of serious injury or threat of serious injury to the domestic industry should take into account not only the share of imported product in the domestic market and the levels of sales and production, but should evaluate all relevant factors including productivity, capacity utilisation, profits and losses and employment. Three of the four domestic producers have increased their output. It is, therefore, doubtful whether there is serious injury or threat to the domestic industry. (iii) Causal link between increased imports of the product and serious injury or threat thereof should be demonstrated on the basis of objective evidence. Recent increase in the imports of AB is mainly due to Indian domestic problems including failure of electricity supply, labour dispute, loss of competitiveness owing to delayed measures to increase efficiency. (iv) Whether provisional safeguard duty at the rate of ₹ 19,500 per MT would cause the total duty of AB to exceed the level given under Schedule of Concessions? India needs to fulfil its duties of investigation, notification and consultation under the Agreement on Safeguards. (F) FINDINGS OF DG 10. I have gone through the case records and the submissions made by the interested parties. The issues raised by various parties are dealt with at appropriate places in the findings below : Product under investigation The product under Investigation is Acetylene Black (AB). AB is a unique type of Carbon Black. It is fluffy and has a bulk density of 19 kg. per cubic meter. It is the purest form of carbon black. It is the most crystalline of the commercial blacks and is a product of low surface activity, low moisture absorption, high liquid (acetone, HCI) absorption and high electrical and thermal conductivity. AB is mainly used to improve the conductivity of manganese dioxide used in dry cells. Abroad it also finds application in the manufacture of rubber heater pads, heater tapes, anti-static belt drives and shoe soles. It is also used in the manufacture of aircraft tyres. The process of manufacture basically comprises of generation of acetylene, its purification and its thermal decomposition to acetylene black. AB is classified under heading 2803.00 of the First Schedule to the Customs Tariff Act, 1975 , which covers Carbon (Carbon blacks and other forms of Carbon not elsewhere specified or included). The Indian Trade Classification (ITC) based on Harmonised Commodity Description divides the heading into three sub-classifications namely, 28030001 - Acetylene Black Carbon, 28030002 - Carbon Black for Rubber Industry and 28030009 Carbon Black not elsewhere specified. The present investigation concerns Acetylene Black classified under heading 2803.00 of the First Schedule to the Customs Tariff Act, 1975 . It may, however, be mentioned that the classification indicated above is only for the purpose of description and does not in any manner restrict the scope of the coverage of the product under investigation. 12. AB in India is manufactured through Calcium Carbide route as well as through the Petrochemical i.e. Hydrocarbon route. In the Calcium Carbide route, AB is produced by the reaction of Calcium Carbide with water. In India AB produced through Calcium Carbide route is costlier than that produced through the Petrochemical route. The domestically produced AB is used for the same purpose as the imported product and is a like article to the imported AB within the meaning of the SGD Rules. 13. The users/importers have claimed that the product imported from Belgium is not AB but it is Conductive Carbon. It has been submitted that M/s. MMMSA, Belgium have developed this new item and is being test marketed as a low cost-substitute to AB. It is manufactured not from acetylene and, therefore, should be excluded from the scope of the present investigation. However, no further details have been provided as to how it is manufactured or is different from AB. 14. It is observed that product imported through Belgium i.e. Conductive Carbon is imported by the dry cell battery manufacturers and is described in the documents as Carbon Black Super P which is used for the same purpose i.e. in the manufacture of dry cell batteries. It functionally and commercially substitutes AB. Persons dealing with AB do not distinguish between AB and Conductive Carbon which is reflected in the reply to Questionnaires (repro- duced below) filed by Indo National Ltd., the importers of Belgium material. a. Name of the product imported : Acetylene Black b. Description of the product including various grades, sizes, models or type etc. : (a) Acetylene Black (Denka) 50% compressed. (b) Carbon Black - Super P (c) Acetylene Black (China) It is evident from the above that the users of Carbon Black Super P, the so-called Conductive Carbon, themselves have described this product as AB. Commercially, functionally and in consumers perception, Carbon Black Super P, the so called Conductive Carbon is the same as AB which is the subject matter of the present investigation. 15. It is also observed that in the compilation of import statistics, the Director General Commercial Intelligence and Statistics (DGCIS), Calcutta has recorded the imports of Carbon Black from Belgium under classification 28030009 which pertains to Carbon Black - nes. However, while the per MT prices of Carbon Black under this classification are in the range of ₹ 137 per kg, the prices of Belgium material have been recorded in the range of ₹ 66 per kg. It is also observed from the copies of import documents provided by the users/importers of AB that the prices of Conductive Carbon i.e. Carbon Black Super-P have been of the order of US $ 1800 PMT CIF. The price of Carbon Black for Rubber Industry is in the range of ₹ 20 per kg and that of Acetylene Carbon Black in the range of ₹ 69 per kg. The price of Conductive Carbon of about ₹ 66 per kg is well beyond the price range of Carbon Black used for Rubber Industry or for other purposes and compares well with the price of AB used in the manufacture of dry cell batteries. 16. In view of the above Conductive Carbon does not merit exclusion from the scope of the coverage of the product under investigation and the present investigation covers all Acetylene Black Carbons including Carbon Black Super P from Belgium, the so called Conductive Carbon. Domestic Industry 17. The findings in paragraph 5(iv) concerning domestic industry given in the Preliminary Findings are confirmed. Increased imports 18. AB was being imported into India in the late 1970s and early 1980s. However, there have been practically imports of only small quantities since middle of 1980s till early 1996. During the period under investigation the imports have increased from 8.3 MT in 1994-95 to 71 MT in 1995-96 and to 1169.42 MT in 1996-97 (on verification of the data furnished by the importers of AB it is found that imports in 1996-97 were 1169.42 MT instead of 841.04 MT). In the year 1997-98 the imports have been 625.38 MT in the first six months (April-Sept.). During the corresponding period the domestic production has been 3355.43 MT, 3570.075 MT, 3274.62 MT and 1272.25 MT respectively. The imports as compared to the domestic production stood at 0.24% in 1994-95, 1.98% in 1995-96, 35.7% in 1996-97 and 49.16% in 1997-98 (April-Sept.). The imports, thus, have increased both in absolute terms as well as compared to domestic production during the period under investigation. 19. The users/importers have claimed that imports during 1994-95 and 1995-96 were only of small quantities and the first year of real imports was 1996-97 but that was an abnormal year in view of the fact that one of the four domestic producers namely M/s. Tecil was non-operative for a considerable period due to power and labour problems. The imports, thus, were made to meet the shortfall in domestic production as well as to meet the increased domestic demand. 20. In this regard it is observed that the increase in imports is to be considered over a period which under the Trade Notice No. SG/TN/1/97 dated 26th September, 1997 issued by the DG has been specified to be a period of the most recent 3 years (or longer) immediately preceding the commencement of investigation for which data is available. In the current investigation, therefore, the period of investigation has been rightly taken as 1994-95, 1995-96, 1996-97 and the first six months of the year 1997-98 for which data was made available by the applicants and verified by the team of officers. Whether or not there were imports in any of these years is irrelevant specially as the evaluation of imports is to be done on a comparative basis for the entire period. If there were no imports or only a small quantum of imports in a year, that year cannot be ignored only on that ground. The increase in imports for the entire period in totality has to be considered for arriving at a decision whether imports have increased during the period. The answer is clearly in the affirmative in the present case. Serious Injury 21. An analysis of various factors attributing to the serious injury reveals that the domestic production has fallen down from 3570.075 MT in 1995-96 to 3274.62 MT in 1996-97 and to 1272.25 MT in the first six months i.e. April-Sept. of 1997-98. The domestic industry thus lost production by 8.28% in the year 1996-97 as compared to 1995-96 which further declined by 22.3% on a pro rata basis in April-Sept., 1997-98 as compared to 1996-97 and by 28.86% as compared to 1995-96. Similarly, the domestic industry faced a decline in capacity utilisation which fell down from 63.75% in 1995-96 to 58.46% in 1996-97 and to 45.42% in the first six months of 1997-98. The domestic industry also lost sales from a high of 3574 MT in 1995-96 to 3017 MT in 1996-97 which further declined to 1291 MT in the first six months of 1997-98. In percentage terms the domestic industry lost 15.58% sales in 1996-97 as compared to 1995-96 and 14.42% in the first six months of 1997-98 on a pro rata basis as compared to 1996-97 and by 27.76% as compared to 1995-96 on a pro rata basis. The domestic industry lost its market share in the apparent consumption i.e. domestic sales plus imports which was 98.05% in 1995-96 to 71.8% in 1996-97 and to 67.38% in the first six months of 1997-98. The imports occupied a share which has progressively increased from 1.95% in 1995-96 to 28.2% in 1996-97 and 32.62% in the first six months of 1997-98. At the same time the inventory of domestic industry built up from 50.71 MT in 1995-96 to 308.12 MT in 1996-97 and 226 MT at the end of first six months in the year 1997-98. The domestic industry also suffered loss in productivity (i.e. production per employee) together with the loss of production as they carried on their operations without retrenching the work force. 22. Serious injury in accordance with Section 8B of the Customs Tariff Act, 1975 means a significant overall impairment in the position of a domestic industry. It is a result of changes in the level of sales, production, capacity utilisation, employment etc. If on an objective evaluation all the factors taken together as a whole certainly tend to show that some degree of adverse effect has been caused to the domestic industry, it may well result in the finding of serious injury. In the case under investigation it is seen that domestic production which reached a peak of 3570.075 MT in 1995-96 from 3355.43 MT in 1994-95 has drastically fallen in 1996-97 and thereafter in 1997-98. The same trend is exhibited in the capacity utilisation as well as in the domestic sales and the share of the domestic production in the apparent consumption. The domestic industry has also suffered increases in the cost of production coupled with reduction in sales realisation resulting in operating losses, stoppage of production by some of the domestic producers and loss of man-days in the case of others. Panyam had to shut down their plant from 10th April, 1997 to 2nd June, 1997 due to insufficient orders. Similarly Senka did not produce AB in September 1997 as there was no off-take by the customers. All these factors put together certainly tend to show that the domestic producers have suffered loss of production, loss of sales, building up of inventories, loss in capacity utilisation, loss of employment and profitability which clearly indicates that the domestic industry has suffered serious injury during the period under investigation. Causal Link 23. The domestic industry has suffered serious injury as observed above. However, the crucial question is whether this sufferance of the domestic industry is on account of increased imports or it is a self inflicted injury on the domestic industry as argued by some interested parties. One of the major issues which needs to be addressed in this regard is the effect of labour and power problems faced by Tecil in the year 1996-97. It has been claimed that Tecil during 1996-97 was having no power supply for 76 days and faced a power cut ranging between 30-70% during the last five months. They also suffered from labour problem for about 48 days. It has been argued that the cumulative effect of these factors has been that Tecil remained inoperative for 124 number of days and suffered 46 percent loss of production on their accounts. On the other hand, the domestic producers have submitted that it is not a matter of fact that Tecil remained closed for 124 days as power and labour problems overlapped each other and, therefore the computation of number of days by Dry Cell Manufacturers is not correct. In this regard, it is observed that the fact is that Tecil did face power and labour problems during the year 1996-97. As against an installed capacity of 2000 MT Tecil accounted for a production of only 474 MT in 1996-97. It has been argued that it is because of this loss of production of Tecil that the total domestic production has shown a decline in 1996-97. The domestic industry comprises of four domestic producers namely, Senka, Tecil, Panyam and Oswal. While the three domestic producers (other than Tecil) showed an increase in production during 1996-97 it was only Tecil who showed a loss of production and thereby bringing down the total domestic production from 1995-96 level. As per the definition of domestic industry it means the domestic producers taken as a whole or those who account for a major proportion of the domestic production. Tecil had an installed capacity of 2000 MT as against the total capacity of 5600 MT and they accounted for a production of 474 MT in 1996-97 as against the total production of 3274.62 MT. On both these counts Tecil who alone suffered loss of production cannot constitute domestic industry and, therefore, injury suffered by Tecil alone by way of loss of production etc. cannot constitute injury to the domestic industry as a whole. 24. It is important to analyse this issue first as it lies in the heart of the determination whether the injury caused to domestic industry is on account of increased imports or on account of other factors. In the present case the domestic industry comprises of four producers. Admittedly as per the definition of the domestic industry all the four producers taken together or those who account for a major proportion of the domestic production need to be considered as domestic industry. The application has been filed on behalf of all the four domestic producers which account for the entire domestic production and the analyses of serious injury in Paragraph 21 and 22 above also takes into account data for all the four domestic producers taken together. 25. The crux of the argument of AB users/importers is that while three out of the four producers, who accounted for a major proportion of domestic production, achieved higher production in 1996-97, the decline in overall pro- duction mainly due to inability of the fourth producer due to power and labour problems cannot result in a finding of loss of production and consequently in the finding of serious injury suffered by the domestic industry as a whole. 26. I am afraid this argument is totally fallacious. Firstly, the law does not require that for a determination of increased imports or serious injury the domestic production must fall. A finding of increased imports is to be arrived at after considering the imports in absolute terms as well as compared to the domestic production. In case the domestic production was increasing but if the imports were increasing still faster, a finding of increased imports can well be made as the imports increased both absolutely as well as compared to domestic production. Safeguard protection will be available to the domestic industry in such a situation if it could be demonstrated that the domestic industry suffered serious injury or a threat thereof caused by the increased imports. In other words, a finding of serious injury does not necessarily require domestic production to fall. Secondly, it is natural that if out of four domestic producers one of them is unable to produce and contribute to its market share, the market share vacated by him would be endeavoured to be taken over by the other domestic producers and for doing so they would have to step up their production to meet with the increased domestic demand created on them as a result of loss of production and sale by one of their fellow producers. 27. It is to be kept in mind that the domestic producers amongst themselves are competitors of each other and would like to make fullest use of any opportunity to capture the market share. It is in the light of this observation that the facts and figures of domestic production of the other three domestic producers would have to be seen. The three domestic producers besides Tecil collectively accounted for a production capacity of 3600 MT. They accounted for a domestic production of nearly 2800 MT in the year 1996-97, out of a total domestic production of 3274.62 MT, 474 MT of which were contributed by Tecil. The three domestic producers, therefore, accounted for about 2800 MT as compared to a capacity of 3600 MT available with them which accounted for 77.78% of capacity utilisation. Taking account of individual capacities it is observed that Panyam had an installed capacity of 1800 MT and they produced 1949 MT. Senka had an installed capacity of 900 MT and they produced 630 MT in 1996-97. They thus had a scope to further achieve production to meet with the domestic demand. I must hasten to add that availability of Calcium Carbide was not an issue as it was freely importable and perhaps at cheaper prices as is evident from the fact that an anti-dumping petition against Calcium Carbide imported from PR China and Romania has been filed before the Designated Authority. In the case of Oswal, they produced about 220 MT in 1996-97. However, it is seen that although they had an installed capacity of 900 MT they have not produced Acetylene Black beyond 220 MT or so. It is also observed that in the year 1996-97 Tecil had power and labour problem till November 1996 and in November 1996 they informed the Dry Cell Manufacturers that they had commenced their operations at full capacity and that they were in a position to offer Acetylene Black. The domestic producers collectively carried a monthly stock of about 20.99 MT on an average from April, 1996 to October, 1996 which increased on an average to 159.88 MT for Nov.-March, 1997 period. Tecil had an opening stock of 4.88 MT in their hand in November, 1996 and they produced 27.33 MT in that month. They however were able to sell only 9.7 MT from out of this quantity, 7.5 MT of which were supplied to Geep. The Inventories of Tecil were built up to 22.91 MT in the beginning of December, 1996 in which month they produced 59.88 MT but could sale only 25 MT as only Lakhanpal lifted this quantity but no other Dry Cell Manufacturer procured material from Tecil. Similarly in the beginning of January, 1997 the inventories went up to 57.8 MT, 61.4 MT in February, 1997 and 92.4 MT in the beginning of March 1997. At the end of March, 1997 the inventory was 89.46 MT. Obviously this was the result of Dry Cell Manufacturers not lifting domestically available Acetylene Black with Tecil. It is also observed that collectively the domestic producers carried an inventory of 308.12 MT at the end of 1996-97 as compared to 50.71 MT of the end of 1995-96. It is, therefore, not correct to state that the domestic producers did not meet with the domestic demand or were not in a position to meet with the domestic demand. 28. An analysis of the domestic demand and supply situation will also be important at this stage. It is observed that in 1996-97 M/s. Geep placed an order of 193 MT on Panyam and lifted 175 MT from them. They placed an order for 50 MT on Tecil and received 25 MT. From Senka, they procured 37.5. M/s. Indo-National Ltd. received 282 MT from Panyam as against 330 MT and 515 MT from Senka as against orders of 480 MT. Lakhanpal Ltd. received 127 MT from Panyam meeting their demand fully and 220 MT from Tecil as against 281 MT. Eveready India Ltd. received 1165 MT from Panyam as against 1203 MT, 127.5 MT from Tecil as against orders of 180 MT and 15 MT from Senka who serviced fully the orders placed on them. In totality the four buyers received 2689 MT of Acetylene Black as against orders of 2896.5 MT resulting in a short supply of 207.5 MT from the domestic producers. This is on the face of the fact that Dry Cell Manufacturers were rescheduling their orders and reducing quantities of their off-take after placing orders on the domestic producers and they were persisting with their demand on the domestic producers to reduce their selling prices to bring the same in line with the imported Acetylene Black prices. As against this short supply of 207.5 MT, the domestic producers carried on an inventory of 308.12 MT as compared to 50.17 MT in 1995-96. The domestic producers could have supplied even this quantity of 207.5 MT if it was not for reasons other than availability of AB with the domestic producers. This reason was the inability of the domestic producers to cope with the demand of bringing their prices in line with the imported prices. 29. The Dry Cell Manufacturers imported 1169.42 MT of AB in 1996-97. They have submitted that there was an increase in consumption of 213 MT from 3645 MT in 1995-96 to 3858 MT in 1996-97 which coupled with a shortfall of 558 MT in production of Tecil accounts for 771 MT which was the cause of increase in imports of about 770 MT of AB in 1996-97. This argument is strongly biased in favour of the imports as it claims the entire growth in consumption and shortfall in production of Tecil to be catered by imports and, is therefore, totally unreasonable. As mentioned above, the actual imports in 1996-97 were 1169.42 MT which were 1098.42 MT more than 1995-96. The apparent domestic consumption (domestic sales + imports) increased by about 14.84% in 1996-97 to 4186 MT as compared to 3645 MT in 1995-96 and fell down by 8.46% to 1916 MT in the first six months of 1997-98 as compared to 4186 MT in 1996-97 on pro rata basis. The share of the imported Acetylene Black in this apparent consumption increased from 0.24% in 1994-95, to 1.95% in 1995-96, to 28.2% in 1996-97 and to 32.62% in the first six months of 1997-98 and the domestic production lost its share from 99.76% to 98.05%, to 71.8% and to 67.38% respectively in the corresponding periods. The domestic producers, accounted for a sale of 3574 MT in 1995-96 out of a total apparent consumption of 3645 MT which increased to 4186 MT in 1996-97 but the domestic sales fell to 3017 MT. Tecil s share in the domestic sale was 389.66 MT. The other three domestic producers, therefore, accounted for 2627.34 MT as against their share of 2531MT in 1995-96, which should have grown to 2906.75 MT taking the growth in apparent consumption into account even if the other three producers had not taken over any of the sales lost by Tecil. The domestic production which increased by about 6% in 1995-96 fell down by 8.28% in 1996-97 and by about 22.3% in the first six months of 1997-98. The domestic producers lost a production of about 295 MT in 1996-97 as compared to 1995-96. If the growth in apparent consumption of about 14.84% is taken into account the domestic producers lost about 825 MT in their production. As mentioned earlier, the actual imports in 1996-97 was 1169.42 MT. After making an adjustment for the quantity of 207.5 MT short supplied, increase of 14.84% in the 71 MT AB imported in 1995-96, the excess imports in 1996-97 amount to about 880 MT. The excess imports compare well with the production of about 825 MT lost by the domestic producers. 30. The serious injury to the domestic industry which started taking place in 1996-97 manifested itself more prominently in the first six months of 1997-98. In this period the domestic production fell down to 1272 MT i.e. by about 22.3% as compared to 1996-97 and by 28.86% as compared to 1995-96 on a pro rata basis. Sales of domestic producers fell down to 1291 MT in the first six months of 1997-98 i.e. by 14.42% as compared to 1996-97 and by 27.76% as compared to 1995-96 on a pro rata basis. The domestic producers could achieve this reduced sales only at reduced prices. Senka dropped its prices of AB from ₹ 1,22,000 PMT to ₹ 95,000 PMT in Sept. 1997, Panyam dropped prices from ₹ 1,04,500 PMT to ₹ 95,000 PMT and Tecil from 1,05,000 PMT to ₹ 94,000 PMT in the same period. Tecil for some time during first half of 1997-98 suffered with power problem and they remained closed from 14th April to 23rd April, 1997 and 6th May to 10th August, 1997. They, however, produced 121.52 MT of Acetylene Black in this period and the other three domestic producers accounted for 1150.48 MT during this period. The production of these three domestic producers which was 2800 MT in 1996-97 fell down by about 17.82% on a pro rata basis. The imports in the first six months of 1997-98 accounted for 49.16% of the domestic production. This happened not because the domestic producers could not cater to the domestic demands as they carried on with an inventory of 308.12 MT in the beginning of the year and 226 MT at the end of the first six months of 1997-98 and they had capacity surplus to cater to the domestic demand including Tecil who did not have sufficient orders to service inspite of a reduced production. A mention has been made about the quality of AB of Senka in 1997. It is observed that Senka manufactured AB to IS Specification No. 12170/1987 and also received merit award from their main customer namely M/s. Indo National Ltd., an Indo-Japanese Joint Venture during this period and sold almost their entire production. While the Allahabad unit of Geep did not raise any complaint on quality of AB supplied by Senka, their Mysore unit manufacturing similar goods did not accept the quality of AB supplied by Senka. The explanation given by Senka in this regard appears reasonable as it is unlikely that the two units of Geep would have different input acceptance norms. It is more likely that quality of Senka s AB was used only as an excuse to meet their requirement from cheaper sources abroad. The Dry Cell Manufacturers were insisting that the domestic producers of AB should reduce their selling prices in line with the imported prices and they also threatened the domestic producers to reduce their off-takes if the prices were not brought down by them. Price being the most important consideration in making a procurement decision, it had its effect on the domestic producers. The average CIF price of imported Acetylene Black fell from US $ 2654 in July, 1996 to about 2500 US $ in August 1996 and continued at this level till January, 1997 and a drastic fall thereafter to 2125 dollars, 2000 dollars and 1900 dollars in Feb., April and July 1997 respectively. The fall in imported AB prices is an admitted fact and the exporters have attributed this to the reduction in the freight charges of imported Acetylene Black. 31. It has also been argued that the AB price compares favourably with the selling price of Oswal and did not influence the price of the indigenous manufacturers other than Oswal. AB produced through Petrochemical route by Oswal was cheaper than the AB produced through Calcium Carbide route by the other three domestic producers. It was this price difference within the domestic industry which was certain to cause the so called price suppression for the other three units. In this regard it is observed that Oswal produced AB in the order of 200-225 MT which is approximately 5% of the domestic consumption. Inspite of lower prices their share in the domestic market remained at the same level. On the contrary, the share of the imported AB has increased manifold at declining prices as mentioned above. It is, therefore, obvious that it was the CIF import prices of AB which caused the price-suppression and influenced the decision to source the supplies. 32. An argument has been raised that price is not a relevant factor for consideration in the Safeguard investigation. In this regard it is observed that unlike in the case of anti-dumping investigation where the price discrimina- tory practices adopted by the exporters is the root cause for an anti-dumping action, in the case of Safeguard investigation increased imports is the funda- mental requirement for maintaining a safeguard action. At what prices the imports are entering is not the relevant factor because it is not the unfair competition which is the subject matter of safeguard action but it is the competition per se offered by the increased imports to the domestic producers, even if it is at fair prices. Only in this context the import prices are not relevant. However, when it comes to determination of serious injury or threat thereof, the law requires an examination of change in level of sales, profitability etc. of the domestic producers. These factors undoubtedly depend upon the prices of competing products and in that context import prices do become relevant and require an examination, specially to assess their effect on the domestic situation. 33. In conclusion, it is observed that the imports have grown phenomenally during the period under investigation. In percentage terms the imports have grown to 885.42% in 1995-96 over 1994-95, to 1646.5% in 1996-97 over 1995-96 and to 106.95% in the first six months of 1997-98 as compared to 1996-97 on a pro rata basis. These increased imports have progressively taken a significant share in the apparent consumption which increased from 0.24% in 1994-95 to 1.95% in 1995-96, 28.2% in 1996-97 and to 32.62% in the first half of 1997-98 on a pro rata basis. The serious injury to the domestic industry is a consequence of these increased imports. Factors other than increased imports do not appear to have any significant effect on the state of the industry in so far as the present investigation is concerned. OTHER ISSUES Inefficiency of domestic producers 34. An issue has been raised that the domestic producers of Acetylene Black are not operating efficiently and that their power consumption per metric ton of AB production is much higher as compared to international norms. In this regard, it is observed that the very purpose of imposition of Safeguard duty is to allow the domestic industry to become competitive. The fact that domestic industry is not competitive itself indicates that domestic industry suffers from certain inefficiencies which need to be removed by re-structuring. If the domestic industry was fully efficient perhaps it would have been competitive and, therefore, no need would have arisen for imposition of Safeguard duty. It is observed that the domestic industry has identified the reasons for their inefficiency and have requested for imposition of Safeguard duty so as to enable them to take necessary steps for improving upon the same and to protect them from the serious injury caused by the increased imports in the meantime. Consumer interest 35. It has been claimed that imposition of Safeguard duty on Acetylene Black would make the Dry Cell Batteries costlier and this would be against consumer interest. In this regard, it is observed that the imposition of Safeguard Duty is not likely to have any significant effect on the user industry and the consumers thereof especially as the Safeguard duty is proposed to be imposed only to the extent necessary to protect the domesic producers of AB. Further, the Safeguard duty is to be liberalised periodically which should further reduce its impact on the user industry. The objective of Safeguard duty being to enable the domestic industry to re-structure itself and make positive adjustments to face the new situation of competition offered by the increased imports, it will be in the larger public interest to impose Safeguard duty as the user industry may then be able to source their requirement from alternative competitive sources. It is, therefore, considered that imposition of Safeguard duty in the present case would not be against consumer interest rather it would serve the general public interest. Price comparability of acetylene black produced through different routes 36. It has been claimed that Acetylene Black produced through Hydrocarbon route is cheaper as compared to the Acetylene Black produced from Calcium Carbide. It has been submitted that Oswal s prices are about ₹ 20,000/- per MT lower than the prices of the other three domestic producers who manufacture Acetylene Black through Calcium Carbide route and the amount of provisional Safeguard duty recommended i.e. ₹ 19,500 PMT is approx. equal to the difference of the price of Acetylene Black manufactured through the two routes. It has been submitted that the price of Acetylene Black produced through different routes should not be compared. In this regard, it is observed that it is a fact that Oswal are manufacturing AB through the Petrochemical route and their prices are generally lower than the prices of other three domestic producers. However, in the case of international market also, as reflected by imports of AB in India, it is seen that the prices of AB exported by different exporters using Petro-chemical route or Calcium Carbide route are similar. The applicants have submitted that AB manufactured through Petrochemical route by DENKA (Singapore) was being sold at approx. US $ 2400 in September 1996 and was brought down to approx. US $ 1800 in October 1997. Correspondingly, in the similar period South Africa and the Philippines who manufactured Acetylene Black using Calcium Carbide have also adjusted their prices from approx. Us $ 2400 down to approx. US $ 1800. It is, therefore, observed that in the international market no distinction is made in the prices of Acetylene Black depending upon the use of raw material. In the case of Indian producers also, therefore, it would not be reasonable to compare the prices of imported AB separately with the AB produced through different routes. The Safeguard duty being levied on the product concerned and the AB products through the two routes being alike, it will be reasonable to compare prices of domestically produced AB on an industry average basis with the average prices of the imported AB irrespective of the route adopted for the manufacture of AB. Adjustment plan 37. The domestic industry has submitted adjustment plan in its application. It was submitted that Tecil who manufacture AB through Calcium Carbide route have decided to have their own captive Hydro-Power Project in Kerala in close vicinity of the manufacturing unit. They intended to install two Hydro-Power Projects with capacity of 7.5 M.W. and 15 M.W. and that the projects were under implementation. Manufacture of Calcium Carbide being the major raw material and power intensive, any savings in the cost of power would have a great impact on the cost of production of AB making it more economical by bringing down the average cost of production. Tecil have submitted details of their Hydro-Power Projects on a confidential basis. It is observed that Tecil have initiated necessary action to re-structure their plant and they are in the process of making a positive adjustment which would enhance their competitiveness. 38. In respect of Senka who are producing Acetylene Black through the Calcium Carbide route, they do not have their own captive Calcium Carbide Unit. They have, therefore, to buy their major raw materials from outside sources. Senka, therefore, submitted that they were discussing with the Petro Chemical Industry for getting Acetylene Gas for converting into AB by cracking the gas. Panyam mentioned that they were also taking steps similar to those proposed by Senka. In this regard, it has been argued that two of the domestic producers have joined in filing an anti-dumping application concerning imports of Calcium Carbide before the Designated Authority in the Ministry of Commerce. In this application it has been mentioned that in India Union Carbide Ethylene Plant at Chembur, Bombay had been recovering acetylene by solvent extraction of the cracked gases in the Naphtha cracker. (But now there are no known manufacture of Acetylene in the Petrochemical Industry in India) . In view of this statement in the anti-dumping application it has been argued that the adjustment plan of Senka and Panyam is not realistic as availability of acetylene through Petrochemical route is doubtful. In this regard, it is observed that the statement made in the anti-dumping application in which two of the domestic producers of Acetylene Black are petitioners is a vague statement to the effect that the petitioners were not aware of any known manufacturers of acetylene in Petrochemical Industry in India. It should be kept in mind that this statement has been made by the petitioners seeking anti-dumping duty to protect their own production of Calcium Carbide and in this context to highlight the need to protect Calcium Carbide as the only source to produce acetylene, they have made this statement. On the other hand, it is seen that Senka has specifically mentioned about their efforts for getting acetylene gas from the Petrochemical Industry for cracking and producing AB. They have been pursuing this matter since March 1996 which has now reached the Ministry of Chemicals and Fertilizers. Senka have also produced a copy of letter dated March 9, 1996 which is addressed to Indian Petrochemical Corporation Ltd., Baroda, in the context of supply of Acetylene Gas as feed stock for manufacture of Acetylene Black. It is also observed that in the anti-dumping application concerning the dumping of Calcium Carbide itself it is mentioned that during the process of manufacture of ethylene in Naphtha/Gas/ Oil crackers a small amount of Acetylene is also formed and the amount of acetylene produced varies with the feed stock and with the temperature of cracking. It is abundantly clear from this document produced by the Dry Cell Manufacturers that acetylene is being generated in the manufacture of ethylene and that the quantum of production of acetylene can be varied with the feed stock and with the temperature of cracking. Possibility of domestic producers of AB to obtain acetylene from Petrochemical units in India is, therefore, not an unrealistic proposal as large petrochemical units producing ethylene have been set-up in India. The matter is before the concerned Ministry and, therefore, the argument made by the Dry Cell Manufacturers is not tenable. It is also observed that for the domestic industry to be competent it is not necessary that the domestic industry must produce Acetylene Black through Petrochemical route alone. Some of the international manufacturers in South Africa and the Philippines are producing Acetylene Black through Calcium Carbide route and such Acetylene Black is entering into the Indian markets at competitive prices which clearly indicates that it is possible to produce Acetylene Black at competitive prices through the Calcium Carbide route. 39. In view of above, it is observed that the adjustment plan submitted by the domestic industry is not hypothetical or academic. They are making a sincere effort to become competitive so as to face competition offered by the imports. It is considered that imposition of Safeguard duty would help them in re-structuring and to become competitive. It is also observed that some of the domestic producers have already taken steps in this direction and the domestic industry would need a period of about two years to substantially complete their plans. Share of different countries 40. The findings in this regard at Paragraph 5(ix) of the Preliminary Findings are confirmed. CONCLUSION AND RECOMMENDATIONS OF THE DG 41. In view of the findings above, it is concluded that increased imports of AB have caused serious injury to the domestic producers of AB and imposition of safeguard duty for a period of two years will be in the public interest. 42. While arriving at the quantum of safeguard duty which will be adequate to protect domestic industry, the cost of production (confidential) of AB produced domestically has been taken on a weighted average basis for the entire domestic industry. Similarly, the CIF import prices of AB have also been taken on weighted average basis. Adjustments have been made for duties, taxes and handling charges as applicable both for domestically produced AB and for the imported AB. No adjustment has, however, been made for the sales tax or other local taxes paid on the domestically produced AB in view of the Budget 1998-99. Provision of levying 4% Special Additional Duty on imports (not meant for sale) which takes into account sales tax and other local taxes etc. generally levied on domestically produced goods. It is also considered that the levy of 4% Special Additional Duty is not likely to have any significant effect on the weighted average cost of production of domestically produced AB as during the period under investigation Tecil and Panyam produced the major raw material i.e. Calcium Carbide captively and Senka alone imported a part of their Calcium Carbide requirement. Oswal also used captively produced acetylene in the production of AB. The weighted average cost of production for the domestic industry is, therefore, not likely to be affected in any significant manner and no adjustment in the weighted average cost of production of domestically produced AB is, therefore, proposed to be made on this count. The domestic producers have claimed 5% profit margin, which is considered reasonable. 43. Accordingly, the below mentioned Safeguard duty is recommended to be imposed on Acetylene Black imported into India for a period of two years from the date of its first imposition. First year @ ₹ 12,950 PMT Second year @ ₹ 8,830 PMT
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