How GSFC will Benefit from the Anti-Dumping Duty
The stock of Gujarat State Fertilizers & Chemicals Ltd (GSFC) normally does not show too much movement in trading. On 28th September, GSFC started nearly 8-9% higher and touched a 52-week high of Rs.133.65. However, towards the close, the price did taper but the stock did close with gains of 3.2% on the NSE, amidst a falling Nifty index.
What exactly triggered this rally in GSFC?
The Central Board of Indirect Taxes and Customs (CBIC) has proposed anti-dumping duties on Caprolactam. This was based on an application made by GSFC requesting for an imposition of anti-dumping duties on imports so as to help Indian production of caprolactam remain competitive.
Based on the prima facie evidence submitted by GSFC and its investigations, the CBIC concluded that anti-dumping duties were warranted on Caprolactam, especially for the consignments coming from the European Union, South Korea, Russia and Thailand. Anti-dumping duties are necessitated when other governments reduce costs through subsidies.
GSFC currently has two caprolactam plants having rated capacities of 20,000 tonnes per annum (TPA) and 50,000 TPA respectively. GSFC is broadly into the manufacture of fertilizers and industrial chemicals and is one of the major producers of caprolactam in India. Benzene and ammonia are some of the major inputs that go into caprolactam.
Countries like China have been traditionally known to dump cheaper products into other countries on the strength of huge subsidies given to them by their government. This gives them an unfair advantage and in such cases, even under the WTO regulations, the anti-dumping duties are justified. Since dumping is hard to prove, it is normally based on the submissions of the aggrieved manufacturer and the investigations of CBIC.
The imposition of anti-dumping duties means that the imported goods are subjected to countervailing duties to the extent of the special benefits that they get to reduce their cost of production. This protects the interests of the local producer like GSFC. Normally, such anti-dumping duties tend to have sustained positive impact on the price of the stock.
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