ASSOCHAM has urged Government to re-impose 10 per cent customs duty on import of paper and paperboards from ASEAN (The Association of Southeast Asian Nations).
Besides, in order to provide a level-playing field to domestic industry, ASSOCHAM has suggested the Union Government to keep the paper and paperboard products in the negative list (i.e. no preferential treatment) while reviewing existing free trade agreements (FTAs) and formulating new FTAs.
“Such measures would ensure that capital already invested and proposed to be invested in further capacity creation by domestic industry is safeguarded, incentivised and grown further,” noted ASSOCHAM pre-budget recommendations on indirect taxes submitted to the Central Government.
The current demand for paper and paperboards in Indian market in 14.4 million tons per annum (MTPA) which constitutes about 3.6 per cent of global demand and is expected to increase to 20 MTPA by 2020 thereby clocking a compounded annual growth rate (CAGR) of about seven per cent.
Though domestic industry has made significant capital investments to ramp-up capacities in the paper and paperboards sector, its economic viability is severely impacted owing to availability and cost of raw materials and other inputs.
“Even as industry is grappling with issue of producing paper and paperboards at competitive costs, the problem has been exacerbated by Government’s policy of extending preferential tariff treatment to the sector under FTAs and other bilateral/multi-lateral trade agreements and pacts,” said Mr D.S. Rawat, secretary general of ASSOCHAM.
India has signed FTA with ASEAN as per which import duties on most of the paper and paperboards is being progressively reduced i.e. from a base rate of 10 per cent to 7.5 per cent from January 1, 2010 to five per cent from January 1, 2011 to 2.5 per cent from January 1, 2013 and to nil rate from January 1, 2014.
Both the United States of America (USA) and European Union (EU) have imposed anti-dumping/anti-subsidy tariffs on import of paper and paperboards from China to protect their domestic industries.
Further, economic slowdown in developed economies and export dependent economies like ASEAN have led to excess capacity in paper and paperboard manufacturing countries. As such, these countries find India as an attractive outlet for diverting their excess inventory thereby taking advantage of low customs duty rates.
While import of paper and paperboards from ASEAN and China into India has increased at a CAGR of 39 per cent and 14 per cent respectively, it is likely to accelerate further in view of higher capacity creation in China and ASEAN duty moving to nil rate from January 1, 2014.
“Nil rate of customs duty on import of paper and paperboards from ASEAN countries leads not only to revenue loss of about Rs 80 crore per annum (based on imports under chapter 48 during 2015-16) to the Indian Government but it also leads to exporting of domestic jobs to other countries and significantly impacts economic viability of many paper mills across India,” highlighted the ASSOCHAM pre-budget recommendation.
The chamber thus urged the Government to not to jeopardize the huge investments made by domestic industry in recent past to upgrade and implement clean technology, product quality, farm forestry and other such initiatives by allowing easy and concessional imports.