Hind Photo Films battles fate as govt imposes duty on raw material

With the Union budget proposing to scrap the relaxation of customs duty on the import of subbed polyester base film, decks have been cleared for the smooth demise of public sector Hindustan Photo Films Manufacturing Company Ltd (HPF). HPF has been dying a slow death for the last several years after it was declared sick in 1996.

The Centre, in fiscal 1999-2000, following repeated memoranda from HPF exempted it from customs duty on the import of subbed polyester base film, which is a basic raw material for manufacturing photographic films.

However, in his Budget proposals in the present fiscal, the finance minister scrapped the relaxation given to the company and imposed a customs duty of 12.5 per cent on all tariff items, including that of subbed polyester base film.

According to highly placed sources from HPF, this will result in 9-10 per cent rise in the cost of HPF's products. This is already facing stiff price war from global firms like Fuji and Kodak.

Apart from bringing subbed polyester base material within the customs' preview, the Union budget has given another benefit to the global firms by reducing the peak rate of customs duty from 15 per cent to 12.5 per cent. This will benefit them a lot, apart from reducing their product costs as well.

"This will be a death blow to HPF, which recently gave a proposal to the Centre for its revival and is somehow managing to run the company with just 2.5 per cent of its capacity utilisation," Mahendra Kumar, chairman and managing director of the Ooty-based company told Business Standard here.

It may be mentioned that the turnover of the company was Rs 17 crore in fiscal 2004-05 and this year as of date was Rs 13.6 crore.

Kumar, who is also the managing director of Bangalore-based HMT(I), was given additional charge of the sick PSU in 2005.

According to him, the government decision will not only affect the future of HPF, but will also benefit the MNCs bringing finished goods to India and doing some minor operations like cutting photo films.

"Besides, they are present in safe zones where they are not required to pay excise and sales tax while we are paying excise duty and customs," he added.

HPF, which was set up in 1967 by the late prime minister, Indira Gandhi, in the Nilgiris district of Tamil Nadu, is so far the only company in south Asia that manufactures photographic films (x-ray) for the health sector, aerial films and industrial films for defence sector.

Being a strategic industry, it had achieved remarkable progress in meeting the photo-goods needs of the country till it was declared a loss-making unit 1992-93.

The company has somehow continued the production till the announcement of the revival package by the government. In its fresh revival plan submitted to the government, the company has requested for a financial support of Rs 286 crore of which Rs 200 crore will be spent towards bank settlements and a minimum financial base of Rs 86 crore to run the company.

Reliable sources say the company has written a letter to the Centre requesting to reconsider the decision of withdrawing exemption of custom duty on subbed polyester base material.