Paper industry cautions against customs duty reduction


New Delhi : The Indian paper industry has strongly cautioned the government against reduction of customs duties, levied on import of machinery and equipment required for the sector, under free trade agreements (FTAs) with other countries, says a leading industry body.

Support TwoCircles

The industry, which is facing huge difficulties in terms of availability of raw material and technology upgradation, has also put forward a demand for the creation of a technology upgradation fund, according to a survey conducted on among major Indian paper manufacturers by the Federation of Indian Chambers of Commerce and Industry (FICCI).

The basic customs duty on paper is presently 10 percent and India is negotiating FTAs with countries such as Indonesia, Thailand, Brazil, Chile, China, South Korea, the US, EU and Gulf countries, which are low-cost paper or pulp producers. Hence, any reduction in the duty structure would spell havoc for the paper industry.

The survey, which is also based on feedback from associations representing paper mills, showed that India is one of the major importers of paper and paperboard.

"Currently, the total domestic demand for paper is 7.2 million tonnes whereas the production is 6.7 million tonnes. The gap between consumption and production has increased over a period of time," the FICCI survey said.

It is estimated that this gap may widen if adequate steps are not undertaken both by the industry and the government to spur the growth of the sector," it added.

According to the chamber, imports of paper have also surged by over 19 percent a year since 2001-02, which again rose to 22 percent during the period from April 2006 to January 2007.

Availability of raw materials has become a contentious issue for the wood-based paper manufacturers and also for waste paper-based manufacturers.

According to the survey, growth sustainability of the industry at nine percent is becoming a major challenge due to insufficient availability of the main raw material of wood or waste paper. This hampers its competitive edge against Brazil, Chile or Indonesia.

The industry is also adversely affected due to the government's policy of not obtaining wood from forests for commercial use. The government also does not allow industrial plantation on degraded forestlands.

Citing examples of countries like Malaysia, Thailand and Indonesia where industrial plantation is allowed on degraded forestlands, Indian paper manufacturers have also demanded a similar concession.

"The difference between the cost of producing one tonne of paper in India compared to other countries comes to around $130 per tonne only because of raw material (not factoring-in other inputs' cost). Countries like Brazil, Chile and Indonesia are low cost producers of pulp and paper mainly due to their large-scale units and high-tech man made plantations of pulpwood species," the survey said.