India and Oman are in the final stages of negotiating a free trade agreement (FTA) that is expected to boost bilateral trade and investment. However, one of the key issues that may delay the conclusion of the deal is the demand for customs duty concessions on petrochemical products such as polypropylene and polyethylene, which are used mainly in the plastics industry.
Oman’s Interest in Petrochemicals
Oman is one of the major exporters of petrochemical products to India, accounting for about 10 percent of India’s total imports of these items. Oman has a large petrochemical complex in Sohar, which produces about 1.4 million tonnes of polypropylene and polyethylene per year. Oman wants India to lower its import duties on these products, which range from 5 to 7.5 percent, to make them more competitive in the Indian market. Oman is India’s third-largest export destination among the Gulf Cooperation Council (GCC) countries, with a bilateral trade of USD 12.39 billion in 2022-23.
India’s Concerns over Duty Cuts
India, on the other hand, is reluctant to offer significant duty concessions on petrochemical products, as it fears that it may hurt its domestic industry and affect its trade balance with Oman. India has a trade deficit with Oman, which stood at USD 3.36 billion in 2022-23. India also has a large domestic demand for petrochemical products, which is expected to grow at a compound annual growth rate of 8 percent till 2030. India has invested heavily in expanding its petrochemical capacity, with several new projects coming up in Gujarat, Odisha, and Tamil Nadu. India argues that lowering import duties on petrochemical products from Oman may undermine its efforts to achieve self-reliance and create employment in this sector.
The Way Forward
The two sides are trying to find a mutually acceptable solution to the issue of duty concessions on petrochemical products, which is seen as a major hurdle in finalizing the FTA. Some possible options include offering a longer phase-out period for duty cuts, allowing a limited quota of duty-free imports, or excluding some sensitive products from the tariff reduction. The FTA talks are also expected to cover other areas such as services, investment, rules of origin, technical barriers to trade, and sanitary and phytosanitary measures. The FTA is likely to be signed before the general elections in India scheduled for April-May 2024, according to an official source.