With 43% increase in imports of paper and paperboard in H1 of FY24 on the back of 25% increase in FY23 in volume terms, India’s Paper Industry has asked for suitably increasing import duty on Paper in the upcoming Budget to provide a level playing field for domestic manufacturers.
Paper Industry has been reeling under stress with underutilisation of capacity in view of indiscriminate increase in import of paper and paperboard, industry body Indian Paper Manufacturers Association (IPMA) has stated in its pre-budget submission to the government.
What is hurting all the more is the fact that the imports of paper and paperboard into India have been increasing in spite of adequate domestic production capacity straddling all kinds of paper. Imports are growing at a rate higher than the growth in domestic production leading to underutilisation of domestic installed capacity in the country, said Mr Pawan Agarwal, President IPMA.
According to IPMA, Paper manufacturers in export dependent economies such as Indonesia and China enjoy substantial export incentives and have come to garner significant market shares in different countries. However, muted demand due to economic slowdown and anti-dumping / anti-subsidy tariffs imposed by the key markets of US and EU on import of paper / paperboard from China and Indonesia has led to significant excess capacity of paper and paperboard in these countries. Taking advantage of the nil or low import duty rates in India, these countries are finding the country as an attractive outlet for diverting their excess inventory.
Domestic industry has invested huge amounts in the recent past to upgrade and implement clean technology, product quality, agro / farm forestry, etc. and more investments are in the pipeline. Such large investments cannot and should not be jeopardised by allowing imports at concessional / nil rates under Free Trade Agreements (FTAs).
Apart from the overall negative impact of duty-free imports on the domestic Paper Industry, it is making most small and medium Paper Mills in India commercially unviable, and also jeopardising the livelihoods of thousands of farmers engaged in agro / farm forestry and supplying wood, the primary raw material, to Paper Mills. According to the Department for Promotion of Industry and Internal Trade (DPIIT), out of over 900 Paper Mills in the country, currently only 553 are operational.
IPMA has asked for increasing the basic customs duty on import of paper and paperboard from 10% to 25% as India’s WTO Bound rate is 40% on these products.
Since an increase in customs duty will not impact the duty-free imports coming into the country under the FTAs, IPMA has asked for keeping paper and paperboard in the Negative / Exclusion List (that is, no preferential treatment in terms of import tariff) while reviewing the existing FTAs (ASEAN, South Korea and Japan) and formulating new FTAs.
IPMA has also asked for issuance of Quality Control Orders (QCOs) for different grades of paper as this will not only assure supply of quality products to the Indian consumers but also check the import of sub-standard products into the country.
Suitable safeguard, anti-dumping and countervailing duties on imports of various grades of paper should be expeditiously imposed, especially after the recommendation of the Directorate General of Trade Remedies (DGTR), IPMA has stated.