Paper industry seeks wood import duty withdrawal

The industry has invested over $5 bn over the past five years to create an overall production capacity of 12.75 mn tonnes

Faced with acute shortage of raw materials resulting into lowering operational capacity despite enormous demand from both domestic and exports market, the paper industry has urged the government withdraw import duty on wood logs / chips and bamboos.

Import duty on wood and bamboos currently stands at 9.36% and 36.14% respectively. Manufacturing paper through imported raw materials is, therefore, unviable. Consequently, paper industry in India has been operating with just 89% of installed capacity despite huge import taking place every year.

Paper industry has invested over $5 billion in the last five years to create an overall production capacity of 12.75 million tonnes. Total paper production stood at 11.38 million tonnes against consumption of 13.10 million tonnes of consumption in the financial year 2013-14. The difference is met through imports.

"India is a wood fibre deficient country, with the domestic demand supply gap in wood widening every year. Currently, the wood and bamboo demand of the paper industry is around 11 million tonnes, and is expected to increase to 15 million tonnes by 2024-25. Shortage of supply with exponential rise in prices of wood is adversely impacting the competitive edge of the industry and the domestic manufacturers are ceding ground to cheaper imports. It is therefore, important to bring down import duty on raw materials to nil," said Rohit Pandit, Secretary General, Indian Paper Manufacturers Association (IPMA).

With 'nil' duty wood logs / chips and bamboos can be imported from all ASEAN countries while will benefit largely to coastal based paper manufacturing plants.

Import scenario is likely to worsen in future with widening gap between production and consumption. IPMA estimates India's paper production and consumption at 22 million tonnes and 23.5 million tonnes respectively by 2024-25.

Currently, the paper industry requires 11 million tonnes of wood and bamboo of which around 75% is met through industry driven agro / social forestry and the rest from the government sources and imports.

"Inadequate raw material availability domestically is a major constraint for the paper industry. There is no dedicated enabling policy for industrial plantation. The National Forest Policy does not permit plantation of pulpable wood species on forest degraded land," said a senior industry official.

There is a significant demand-supply gap in respect of the primary raw material for the industry - wood. Consequently, the cost of wood has gone up exponentially over the last few years. Growing cost of raw material coupled with significant cost increase of fuels has resulted in a substantial increase in the cost of domestic manufacture of paper and paperboards.

About 1 million TPA of integrated pulp, paper and paperboards capacity is required to get created in India on an annual basis over the current capacity of 12.75 million tonnes to meet the growing demand as mentioned above.

India imported around 3.5 million tonnes of pulp and waste paper worth $1.5 billion in the financial year 2013-14 to meet its raw material requirement. Import of pulp and waste paper was reported at 3.3 million tonnes worth $1.3 billion in the previous year.

Further, the industry has sought correction in anomaly of levying higher excise duty on tissue paper and paper / paperboard covered with plastic layer.

While the applicable rate of excise duty on most items of paper and paperboard stands at 6%, that of excise duty on tissue paper and paper and paperboard covered with plastics is 12%.

Being a bio-degradable, hygienic and convenience product, the tissue paper segment deserves fiscal support so as to encourage its usage.