WORLD TRADE
ORGANIZATIONG/SG/N/8/IND/1
18 September 1998
(98-3596)
Committee on Safeguards Original:  English
NOTIFICATION UNDER ARTICLE 12.1(B) OF THE
AGREEMENT ON SAFEGUARDS ON FINDING A SERIOUS INJURY
OR THREAT THEREOF CAUSED BY INCREASED IMPORTS
INDIA
The following communication, dated 26 August 1998, has been received from the Permanent
Mission of India.
_______________
I am directed to refer to India's communication dated 18 December 1997, circulated as WTO
Document No. G/SG/N/6/IND/1 dated 7 January 1998, regarding notice of initiation of a safeguard
investigation concerning imports of 'Acetylene Black' into India and to forward herewith a copy of theNotification No. SG/INV/1/1997 dated 16 June 1998, under Article 12.1(b) of the Agreement on
Safeguards, containing the Final Findings of the Director General (Safeguards) with regard to the
investigation under reference.
It may be mentioned here that the Government of India has not yet taken any decision on
these findings to impose safeguard duty on imports of Acetylene Black into India.  It is requested that
this Notification under Article 12.1(b) of the said Agreement may please be brought to the notice ofthe Members.
TABLE OF CONTENTS
Page
(A) PROCEDURE ......................................................................................................................3
(B) VIEWS OF THE DOMESTIC INDUSTRY ......................................................................4
(C) VIEWS OF THE USERS/IMPORTERS ...........................................................................7
(D) VIEWS OF THE EXPORTERS/EXPORTING COUNTRIES .......................................9
(F) FINDINGS OF DG ............................................................................................................11
Product under inve stigation .......................................................................................11
Domestic in dustry......................................................................................................13
Increased imports.......................................................................................................13
Serious in jury.............................................................................................................13
Causal link .................................................................................................................14
OTHER ISSUES .............................................................................................................................18
Inefficiency of dom estic producers............................................................................18
Consumer interest ......................................................................................................19
Price comparability of acetylene blac k produced through different routes ...............19G/SG/N/8/IND/1
Page 2
Page
Adjustment plan.........................................................................................................19
Share of differen t countries........................................................................................20
CONCLUSION AND RECOMMENDATIONS OF THE DG ...................................................21G/SG/N/8/IND/1
Page 3
DIRECTOR GENERAL (SAFEGUARDS)
5TH FLOOR, DRUM SHAPE BUILDING
I.P. BHAWAN, I.P. ESTATE
NEW DELHI
NOTIFICATION
No. SG/INV/1/1997
16 June 1998
Subject:  Safeguard Investigation Concerning Imports of Acetylene Black – 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 27 January 1998, published in the official gazette
on 4 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 March 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 the People's Republic of China.
Their request was considered and an extension of time up to 24 March 1998 was allowed.
4. Replies to the notice dated 27 January 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 People's Republic of China;
(iii) MCCI Corporation Philippines;
(iv) South African High Commission as convenor for six countries involved
namely Belgium, People's 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;G/SG/N/8/IND/1
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(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 theverification was communicated to the concerned parties.
6. A Public Hearing was scheduled for 12 May 1998, which was postponed and held on
26 May 1998.  The 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 Kaisha (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 the DG on 3 June 1998.  Parties were asked to collect copies of
written submissions of other parties from the office of the DG on 4 June 1998 and to submit rebuttalsif 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 Manufactur ers' Association (ADCBM) is not known to
them and they were not aware whether it was a recognized body to make a representation.
ADCBM neither figured in the application filed by the domestic producers of Acetylene
Black nor did it enrol 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 an 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 imports of AB, unethical price
undercutting by the exporting countries and the insistence of the indigenous dry cell battery
manufacturers in creating a price war between imports and indigenous sources, revisedschedules 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 the
power situation in Kerala and depressed performance of the industry in 1996-97.  Thedomestic 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 (secondhalf) 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.G/SG/N/8/IND/1
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(v) During the quarter Oct.-Dec. 1997, produc tion of AB in Panyam was only 296 MT as
against 937 MT during the period April-September 1997.  By September 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 1,800 TPA and was expected to produce it 80 per cent efficiency, in fact produced as
much as 1,949 MT in 1996-97 but could sell only 1,786 MT due to reduced level of offtake.
(vii) Shutdown of the Panyam plant for one month during September 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 utilization 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 CalciumCarbide for Senka so that they could produce AB on a conversion basis.  M/s. Eveready
Industries and M/s. Lakhanpal could have also utilized 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 ups 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 problems 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 November 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 neitherSenka nor Panyam were approached by IDCBM with orders to supply and there 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 a 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 maincustomer M/s. INL.  Geep had two manufacturi ng plants, one at Allahabad and the other at
Mysore.  While the Allahabad Plant did not raise any quality problems, towards the end of
1996 the Mysore Plant complained about Senka's AB quality was 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 morelikely that Geep was committed to imports and wanted some excuse for not purchasing from
the domestic industry.  They reduced off-takes due to build up of stocks of imported AB.G/SG/N/8/IND/1
Page 6
(xiii) Tecil too had stabilized 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 Re 127,576 in 1996-97 to
Re 110,146 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 $2,400
per MT to $1,700 per MT.
(xviii) The contention of M/s. INL in seeking a price reduction to Re 95,000 per MT on the
grounds 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 January 1998.
(xx) Imports have increased by about 1,100 per cent in 1996-97 and the trend of imports
of AB continues in 1997-98 as the imports in 1997-98 rose to 1,640 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 2,001 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 shouldreduce the cost of production.
(xxiii) The domestic producers have requested that the product exported from Belgium
should not be excluded on the grounds that it is described "Conductive Carbon" since
commercially and technically it substituted AB.
(xxiv) The labour and power problems were overlapping 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 the term dumping in the Safeguard application was in a generic sense and
not in the technical sense of dumping.G/SG/N/8/IND/1
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(xxvi) The Report of the 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 Carb ide 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) C.i.f. pricing of exporters is the same irrespective of the method of manufacturing i.e.
through Petrochemical or Calcium Carbide route.  No distinction on the basis of route,
therefore, needs to be made.
(xxxi) Reduction in the 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 per cent complete.  Tecil has also entered intoa collaboration with M/s. Kedab Engineering, Australia, for augmenting and modernizing of
the production facilities to enhance installed capacity to 3,600 TPA.  Senka and Panyam have
collectively presented a plan to the Ministry of Chemicals & Fertilizers 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 imports in the first four months of 1997-98
were 250.57 MT and was less than the corresponding imports in 1996-97 of 280 MT onproportionate basis.
(ii) Since imports as a percentage of domestic production have increased from 25.68 per
cent in 1996-97 to 29.54 per cent in 1997-98, i.e. by only 4 per cent, it cannot be considered
as import of the article in such increased quantity.  There has been no such increased importseither 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 utilization 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
3,570 MT in 1995-96 to 3,275 MT in 1996-97, the production of Panyam increased from
1,922 MT to 1,949 MT from 1995-96 to 1996-97 even though Panyam had closed down for
one month for maintenance purposes, Senka's production also went up from 440 MT toG/SG/N/8/IND/1
Page 8
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 an increase in production in 1996-97.  It was only in the case of the fourth producer
namely Tecil that there was a fall in production from 1,031.8 MT to 473.93 MT.  The fall in
production in Tecil was due to serious power cuts and workers' strike.  Fall in production inTecil was, therefore, not due to the alleged increased imports.
(v) The fall in capacity utilization is mainly attributable to the drop in apparent demand
in the first half of 1997-98 by 14 per cent, and increase in installed capacity by about 6 per
cent 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 per cent in 1996-97
to 22.81 per cent in 1997-98 i.e. 1 per cent, cannot be regarded as serious injury resulting insignificant overall impairment of the domestic industry.
(vi) Injury to domestic industry is a self-inflicted injury as they increased the installed
capacity from 5,300 MT to 5,600 MT in spite of a low capacity utilization.  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 was much earlier than 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 tothe 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 questions
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 per cent of their installed capacity.  Their cost of production of AB is about Re 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 th e 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 utilization.  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 per cent of the import price of US$1,800.  This is in addition to the existing customs dutyof 35 per cent and thus takes the total levy to 63 per cent 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.G/SG/N/8/IND/1
Page 9
(xiii) The increased domestic consumption from 3,645 MT in 1995-96 to 3,858 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 three 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 manufacturers of acetylene in the 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 prices.
(ii) Current rate of protection to the domestic producers against imports is sufficient since
duties have been reduced from 85 per cent in 1993-94 to the current level of 35 per cent on
c.i.f. value and the domestic producers who had more than 97 per cent of market share of AB
up to 1996 still have 85 per cent 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 Mumbai came down from US$3,600 in 1996 to the current rateof US$1,050.  The Rand US$ exchange rate also went up from R 3.63 per US$ to R. 5.10 – a
depreciation of 40 per cent.
(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 tothe Indian market.
(v) The cost of local raw materials i.e. electricity, lime and reluctance have pushed the
Indian producers of AB to a corner where th ey 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$1,900 PMT @ 1US$ = Re 32.25 and the present
price is US$1,800 PMT @ 1US$ = Re 41.75.  The price has reduced as a result of drastic
reduction in sea freight.G/SG/N/8/IND/1
Page 10
(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 ofAB 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$2,280 in 1996 to US$1,970
in 1997 (c.i.f.) was due to a fall in international prices.
(d) The Embassy of the People's 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 impor ters/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 cuts, labourproblems and obsolete production method whereby AB is produced from Calcium Carbide
which is extremely energy intensive.G/SG/N/8/IND/1
Page 11
(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 per cent) and the local production remainsstable over a considerable period.
(ii) Significant price drop of imported AB occurred only after April 1997 while the
increase of imports started a year back.
(iii) Indian industry suffers from over cap acity 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 of 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 utilization, 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 Re 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:
11. 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 carbonG/SG/N/8/IND/1
Page 12
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 manufacturebasically 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 Harmonized Commodity Description
divides the heading into three sub-classifications namely, 28030001 – Acetylene Black Carbon,
28030002 – Carbon Black for Rubber Industry a nd 28030009 – Carbon Black not elsewhere
specified.  The present investigation concerns Acetylene Black classified under heading 2803.00 ofthe 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 articl e to the imported AB with in 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 it 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, nofurther 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 dealin g with AB do not distinguish between AB and
Conductive Carbon which is reflected in the reply to Questionnaires (reproduced below) filed by IndoNational Ltd., the importers of Belgium material.
(a) Name of the product imported: Acetylene Black
(b) Description of the product (a) Acetylene Black (Denka)
including various grades, sizes, 50 per cent compressed.models or type etc. (b) Carbon Black – Super "P"
(c) Acetylene Black (China)
It is evident from the above that the users of Ca rbon 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 Blackfrom 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 Re 137 per kg., the
prices of Belgium material have been recorded in the range of Re 66 per kg.  It is also observed from
the copies of import documents provided by the users/importers of AB that the prices of "conductiveG/SG/N/8/IND/1
Page 13
Carbon" i.e. Carbon Black Super P have been of  the order of US$1,800 PMT c.i.f.  The price of
Carbon Black for the Rubber Industry is in the range of Re 20 per kg. and that of Acetylene Carbon
Black in the range of Re 69 per kg.  The price of Conductive Carbon of about Re 66 per kg. is well
beyond the price range of Carbon Black used for the 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 the middle of the 1980s until 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 1,169.42 MT in 1996-97 (on verification of the data furnished by the importers of
AB it is found that imports in 1996-97 were 1,169.42 MT instead of 841.04 MT).  In the year 1997-98the imports have been 625.38 MT in the first six months (April-Sept.).  During the corresponding
period the domestic production has been 3,355.43 MT, 3,570.075 MT, 3,274.62 MT and 1,272.25 MT
respectively.  The imports as compared to the domestic production stood at 0.24 per cent in 1994-95,
1.98 per cent in 1995-96, 35.7 per cent in 1996-97 and 49.16 per cent in 1997-98 (April-Sept.).  The
imports, thus, have increased both in absolute terms as well as compared to domestic productionduring 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 26 September 1997 issued by the DG has been
specified to be a period of the most recent three years (or longer) immediately preceding the
commencement of investigation for which data is availa ble.  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 especially 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 tota lity 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 3,570.075 MT in 1995-96 to 3,274.62 MT in 1996-97 and to
1,272.25 MT in the first six months i.e. April-Sept. of 1997-98.  The domestic industry thus lostG/SG/N/8/IND/1
Page 14
production by 8.28 per cent in the year 1996-97 as compared to 1995-96 which further declined by
22.3 per cent on a pro rata  basis in April-Sept. 1997-98 as compared to 1996-97 and by 28.86 per
cent as compared to 1995-96.  Similarly, the domestic industry faced a decline in capacity utilization
which fell down from 63.75 per cent in 1995-96 to 58.46 per cent in 1996-97 and to 45.42 per cent in
the first six months of 1997-98.  The domestic industry also lost sales from a high of 3,574 MT in1995-96 to 3,017 MT in 1996-97 which further declined to 1,291 MT in the first six months of 1997-
98.  In percentage terms the domestic industry lost 15.58 per cent sales in 1996-97 as compared to
1995-96 and 14.42 per cent in the first six months of 1997-98 on a pro rata  basis as compared to
1996-97 and by 27.76 per cent 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 per
cent in 1995-96 to 71.8 per cent in 1996-97 and to 67.38 per cent in the first six months of 1997-98.
The imports occupied a share which has progressively increased from 1.95 per cent in 1995-96 to28.2 per cent in 1996-97 and 32.62 per cent 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 the 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 utilization, 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 beencaused 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 3,570.075 MT in 1995-96
from 3,355.43 MT in 1994-95 has drastically fallen in 1996-97 and thereafter in 1997-98.  The same
trend is exhibited in the capacity utilization as well as in the domestic sales and the share of the
domestic production in the apparent consumption.  The domestic industry has also suffered increasesin the cost of production coupled with reduction in sales realization 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 10 April 1997 to 2 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 s how that the domestic producers have suffered loss of
production, loss of sales, building up of inventories, loss in capacity utilization, loss of employment
and profitability which clearly indicates that the domestic industry has suffered serious injury duringthe 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 per cent during the last five months.  They
also suffered from labour problems 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 per
cent 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 Manufacturersis 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 2,000 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 industryG/SG/N/8/IND/1
Page 15
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 thereb y bringing down the total domestic production from
the 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 aninstalled capacity of 2,000 MT as against the total capacity of 5,600 MT and they accounted for a
production of 474 MT in 1996-97 as against the total production of 3,274.62 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 entiredomestic production and the analyses of serious injury in Paragraphs 21 and 22 above also take 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 production 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, afinding 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 woul d 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 theirfellow 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 threedomestic producers would have to be seen.  The three domestic producers besides Tecil collectively
accounted for a production capacity of 3,600 MT.  They accounted for a domestic production of
nearly 2,800 MT in the year 1996-97, out of a total domestic production of 3,274.62 MT, 474 MT of
which were contributed by Tecil.  The three domestic producers, therefore, accounted for about
2,800 MT as compared to a capacity of 3,600 MT available with them which accounted for 77.78 percent of capacity utilization.  Taking account of individual capacities, it is observed that Panyam had
an installed capacity of 1,800 MT and they produced 1,949 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 notG/SG/N/8/IND/1
Page 16
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 China, P.R. 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 powerand labour problems until 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 the Nov.-March 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 Tecilwere built up to 22.91 MT in the beginning of December 1996 in which month they produced
59.88 MT but could sell 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 ofDry 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 at 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 MT.  M/s. Indo National Ltd. received 282 MT from Panyam as against 330 MT and515 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
1,165 MT from Panyam as against 1,203 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
2,689 MT of Acetylene Black as against orders of 2,896.5 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 domesticproducers 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 theinability of the domestic producers to cope with th e demand of bringing their prices in line with the
imported prices.
29. The Dry Cell Manufacturers imported 1,169.42 MT of AB in 1996-97.  They have submitted
that there was an increase in consumption of 213 MT from 3,645 MT in 1995-96 to 3,858 MT in1996-97 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 1,169.42 MT which were 1,098.42 MT more than 1995-96.The apparent domestic consumption (domestic sales + imports) increased by about 14.84 per cent in
1996-97 to 4,186 MT as compared to 3,645 MT in 1995-96 and fell down by 8.46 per cent to
1,916 MT in the first six months of 1997-98 as compared to 4,186 MT in 1996-97 on a pro rata
basis.  The share of the imported Acetylene Black in this apparent consumption increased fromG/SG/N/8/IND/1
Page 17
0.24 per cent in 1994-95, to 1.95 per cent in 1995-96, to 28.2 per cent in 1996-97 and to 32.62 per
cent in the first six months of 1997-98 and the domestic production lost its share from 99.76 per cent
to 98.05 per cent, to 71.8 per cent and to 67.38 per cent respectively in the corresponding periods.
The domestic producers accounted for a sale of 3,574 MT in 1995-96 out of a total apparent
consumption of 3,645 MT which increased to 4,186 MT in 1996-97 but the domestic sales fell to3,017 MT.  Tecil's share in the domestic sale was 389.66 MT.  The other three domestic producers,
therefore, accounted for 2,627.34 MT as against their share of 2,531 MT in 1995-96, which should
have grown to 2,906.75 MT taking the growth in appa rent 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 per cent in 1995-96 fell by 8.28 per cent in 1996-97 and by about 22.3 per cent
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 per cent istaken into account the domestic producers lost about 825 MT in their production.  As mentioned
earlier, the actual imports in 1996-97 was 1,169.42 MT.  After making an adjustment for the quantity
of 207.5 MT short supplied, increase of 14.84 per cent 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
to 1,272 MT i.e. by about 22.3 per cent as compared to 1996-97  and by 28.86 per cent as compared to
1995-96 on a pro rata  basis.  Sales of domestic producers fell down to 1,291 MT in the first six
months of 1997-98 i.e. by 14.42 per cent as compared to 1996-97 and by 27.76 per cent 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 Re 122,000 PMT to Re 95,000 PMT in
September 1997, Panyam dropped prices from Re 104,500 PMT to Re 95,000 PMT and Tecil from
Re 105,000 PMT to Re 94,000 PMT in the same period.  Tecil for some time during the first half of1997-98 suffered with power problems and they remained closed from 14 April to 23 April 1997 and
6 May to 10 August 1997.  They, however, produced 121.52 MT of Acetylene Black in this period
and the other three domestic producers accounted for 1,150.48 MT during this period.  The production
of these three domestic producers which was 2,800 MT in 1996-97 fell by about 17.82 per cent on a
pro rata  basis.  The imports in the first six months of 1997-98 accounted for 49.16 per cent 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 and226 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 in spite 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 a merit award from
their main customer namely M/s. Indo National Ltd., an Indo-Japanese Joint Venture during thisperiod 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 fromcheaper 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 c.i.f. price of imported Acetylene Black fell from US$2,654 in July 1996 toabout US$2,500 in August 1996 and continued at this level until January 1997 and a drastic fall
thereafter to $2,125, $2,000 and $1,900 in February, April and July 1997 respectively.  The fall in
imported AB prices is an admitted fact and the expo rters have attributed this to the reduction in the
freight charges of imported Acetylene Black.G/SG/N/8/IND/1
Page 18
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 industrywhich 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 per cent of
the domestic consumption.  In spite 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 c.i.f.-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 discriminatory practices adopted by the exporters is the root cause for an
anti-dumping action, in the case of a Safeguard investigation increased imports is the fundamental
requirement for maintaining a safeguard action.  At what prices the imports are entering is not therelevant 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 pricesof competing products and in that context import prices do become relevant and require an
examination, especially 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 per cent in 1995-96 over1994-95, to 1,646.5 per cent in 1996-97 over 1995-96 and to 106.95 per cent 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 per cent in 1994-95
to 1.95 per cent in 1995-96, 28.2 per cent in 1996-97 and to 32.62 per cent 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 insofar 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 inefficiencieswhich 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 has
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 themeantime.G/SG/N/8/IND/1
Page 19
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 industryand the consumers thereof especially as the safeguard duty is proposed to be imposed only to the
extent necessary to protect the domestic producers of AB.  Further, the safeguard duty is to be
liberalized periodically which should further reduce its impact on the user industry.  The objective of
safeguard duty being to enable the domestic industry to restructure 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 th e 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 Calciu m Carbide.  It has been submitted that Oswal's
prices are about Re 20,000 per MT lower than the prices of the other three domestic producers who
manufacture Acetylene Black through Calcium Carbid e route and the amount of provisional safeguard
duty recommended i.e. Re 19,500 PMT is approximately equal to the difference of the price ofAcetylene Black manufactured through the two routes.  It has been submitted that the price of
Acetylene Black produced through different routes s hould 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 the 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 Petrochemical route or Calcium Carbide route are similar.  The
applicants have submitted that AB manufact ured through Petrochemical route by DENKA
(Singapore) was being sold at approximately US$2,400 in September 1996 and was brought down to
approximately US$1,800 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 approximately US$2,400 down to approxim ately US$1,800.  It is, therefore, observed that
in the international market no distinction is made in the prices of Acetylene Black depending upon theuse of raw material.  In the case of Indian produc ers 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 themanufacture of AB.
Adjustment plan
37. The domestic industry has submitted an 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 MW and 15 MW and that the projects were
under implementation.  The 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 ABmaking 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 restructure their plant and they are in the process of making a positive adjustment
which would enhance their competitiveness.G/SG/N/8/IND/1
Page 20
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
Petrochemical 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 domesti c 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 the Union Carbide Ethylene Plant
at Chambur 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 beenmade 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 hasnow reached the Ministry of Chemicals and Fertilizers.  Senka have also produced a copy of a letter
dated 9 March 1996 which is addressed to the Indian Petrochemical Corporation Lt., 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.  The 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 madeby 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 the 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 dutywould help them in restructuring and to become comp etitive.  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.G/SG/N/8/IND/1
Page 21
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 c.i.f. 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 domesticallyproduced AB in view of the Budget 1998-99 Provis ion of levying 4 per cent 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 per cent 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 themajor 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 we ighted average cost of production of domestically
produced AB is, therefore, proposed to be made on this count.  The domestic producers have claimed5 per cent 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 @ Re 12,950 PMT
Second year @ Re 8,830 PMT
    (Signed)
 (R.K. Gupta)
DG-Safeguards
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