Mini-budget hits top-end ceramics sector

The ceramic tiles industry is crying foul at the latest announcements made by the central government.

The interim budget has come as a shock for indigenous ceramic tile manufacturers.

The drop in duties on imported tiles will erode the industry's viability as it will lead to closure of number of manufacturing units as a result of such high duties, Vijay Aggarwal, managing director of H&R Johnson (India) Ltd, said.

The rationalisation of customs duties by the finance ministry has reduced peak rate of duty by 11.6 per cent.

As a result, the effective duty on imports of ceramic and vitrified tiles has come down from 50.8 per cent to 39.2 per cent.

However, the rate of duty on raw materials and intermediates was at 39.2 per cent. This has placed local manufacturers at a big disadvantage against imports.

Industry sources warned the duty structure would discourage Indian manufacturers to invest in any value addition or fresh investments in the capacity or modernisation of existing units.

The customs duty on raw material should ideally be lower than that on finished goods, so that investors would find it worthwhile to put money into local manufacturing units. Fresh investments would come in only is a level playing field was created.

The drop in duty will lead to surge in dumping of cheap imports in the Indian ceramic tile market. Such cheap imports had threatened the industry's viability, especially of units in the vitrified segment.

It had also severely hampered the potential of the sector to expand and attract new investments. It is estimated that during the financial year, imported tiles worth Rs 100 crore were dumped in the Indian tiles market.

Ceramic and vitrified tiles were placed under Chapter 69 of the central excise tariff. They had emerged as the preferred medium for wall and floor coverings in new generation middle class homes currently being built in large numbers in the country following reduction in home loan rates.

These were being used increasingly as wall and floor cladding in rural areas as well owing to inherent properties like high strength and low maintenance.

Utilities like schools, hospitals, laboratories, public toilets etc. were facilities where such tiles were used to maintain cleanliness, hygiene and long life.

The Indian tile industry consists of 16 players in the organised sector and a large number of unorganised sector units. The total turnover of the organised industry is around Rs 2,000 crore.

The Indian ceramic tile industry employs 10,000 directly and provides 25,000 persons indirect employment, according to the industry.