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Paper
Highlights
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Removal of 10% surcharge on custom duty on all imported
items.
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Reduction of corporate tax surcharge and reduction in
dividend tax.
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Amendment of Contract Labour Abolition Act to allow industry
to outsource contract labour
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16% excise to be levied on cartons, boxes, containers,
corrugated paper boards instead of earlier 8%
| Budget
Impact |
| Excise |
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Customs |
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Policy
Tax |
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Removal of surcharge on custom duty will result in intensification
of competition from imports. As paper and paperboards are
charged to custom duty at 35%, the impact of removal of surcharge
on finished products will result in a hit to the domestic
manufacturer. On the other hand, there will be no major impact
on inputs as most of it is sourced domestically, except for
some of the smaller units that import wood pulp. The suggestion
of the paper association to reduce excise duty to 8% on paper
manufactured with 75% un-conventional raw material has also
gone unheeded.
In the
newsprint segment where the custom duty is already at a
low 5% and industry has been complaining of misuse of user
licence by large paper consumers, major domestic manufactures
like Tamil Nadu Newsprint will be affected. The labour legislation
amending the Contract Labour Abolition Act, will have a
positive impact on the industry, as it will enable companies
to outsource contract labour.
Doing
away with tax surcharge on profits and reduction in dividend
tax will only marginally benefit the paper industry. For
the nine-months ended December 2000, the industry has recorded
a small profit with pressure on margins. Profitability and
tax savings would depend on the industry's ability to raise
the price of paper and control costs.
Outlook
The industry turnover is in the region of Rs.10,000 crore.
India is self-sufficient in paper and has an annual installed
capacity of nearly 5.5 million tonnes. The country is self-sufficient
in paper production. Nevertheless, the industry has been
facing competition from cheap imports, and capacity utilisation
has been less than 80%.
The
paper industry is on a recovery path after a long spell
of recession. Demand for industrial paper, especially paperboards,
is firming up and global paper prices are also on the rise.
However, removal of surcharge will further reduce international
price compared to the domestic landed price of paper in
most segments of paper.
The
industry has registered a 9.4% growth in production to 4.7
million tonnes in 1999-00, with capacity utilisation of
approximately 82%, compared to a rise of 2.5% in production
and capacity utilisation of approximately 75% in 1998-99.
However, in the first half of fiscal (April-September) 2000-01
there is a perceptible drop in production level.
| Voices |
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Many
of our demands have not been met in the budget. We will
have to face increased competition from imports. However,
removal of 10% surcharge on corporate tax and reduction
in dividend tax are moves that are welcome.
K
L Chandak, ED, West Coast Paper Mills
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