KARACHI, Nov 2: The Competition Commission of Pakistan (CCP) has sought comments from the Federal Board of Revenue (FBR) with regard to an inquiry into monopolistic practices by manufacturers of polyethylene terephthalate (PET) resin, PET bottles, preforms and BOPET polyester film.

The CCP had started preliminary investigations into the issue in September on receipt of complaints from Astro Plastics and Fine Star Industries, duly supported by other industry players.

CCP sources told Dawn that the commission has sought duty structure on PET resin which is a basic raw material used to manufacture PET bottles, polyester yarn and PET film.

The manufacturers of PET film, who recently set up its plant at a cost of Rs3.38 billion at Port Qasim along with other stakeholders, approached the CCP complaining that the manufacturer of PET bottles, polyester yarn and PET film are enjoying duty protection when it was manufacturing its own raw material, PET resin, sources added.

The newly set up plant, Astro Plastics producer of BOPET film (polyester films), stated in its complaint that annual production capacity of their unit was 18,000 tons whereas annual production capacity of their competitor Novatex is 25,000 tons. Consequently, the Novatex which is more than 20 years old company is indulging in abuse of its dominant position in PET resin and polyester film market, in violation of Section 3 of Competition Act, 2010.

Furthermore, the company is financially strong with last year’s profit of over Rs1.91 billion, so it is certainly not in need of any further protection.

The CCP sources said after getting FBR input the commission can reach a conclusion, and if there are any anti-competition activities, the commission would recommend dismantling of monopolistic practices.

The commission would, thereafter, direct the government for review of duty structure.

However, the FBR would have to justify if the existing duty structure was in the best economic interest of the industry or it was creating monopolistic and protectionist tendencies, sources added.

The CCP was further informed in the complaint as the country possesses more than sufficient production capacity of PET resin, the raw material for the new plant (Astro Plastics) would either be procured locally from Novatex or imported after competitive analysis.

Therefore, there was an urgent need for rationalising the duty structure to dismantle monopolistic practices to allow space for other manufacturers to compete on equal terms.

The unfair duty structure of PET resin, they argued, is being manipulated by Novatex to create a situation in which level-playing field is not available to market players of PET resin industry and BOPET film manufacturer.

If film is levied at 20 per cent, Novatex is capable of earning 17 per cent profit in excess of profit on PET resin (yarn grade) despite the two resins being identical.

A spokesman for the National Tariff Commission (NTC), which has recently initiated an investigation to rationalise the tariff structure of PET resin (all grades) and its downstream products, said presently information gathering process is going on.

Though information gathering takes time and the NTC has officially four months for completing its findings, but it is hoped that commission’s report will be finalised by December 2012.

The NTC can put up its recommendations before the government, but the final authority of making decision falls with Economic Coordination Committee of the Cabinet.

Responding to a question, he said undoubtedly the government will have to take decision based on NTC recommendations.

However, the spokesman further stated that whereas anti-dumping and countervailing duties are concerned, the NTC directly imposes them without government involvement, but in case of rationalisation of tariff structure, the government is the final authority.