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ASSOCHAM has urged Central Government to impose 10 per cent customs duty on import of hardwood chemical pulp and bleached chemical-thermomechanical pulp (BCTMP) to encourage domestic pulp production, provide a fillip to job creation and promote the overall economic development of India’s vast rural hinterland housing pulpwood plantations.
“These measures would help energize creation of sustainable sources of fiber required by Indian pulp and paper industry,” noted the ASSOCHAM pre-budget recommendations on indirect taxes submitted to the Union Government.
ASSOCHAM has also sought policy measures to be put in place to facilitate private sector participation in plantation development programmes. The recommendations will reach to the desk of Mr. Suresh Prabhu, Union Finance Minister.
Besides, the chamber has also recommended that import of capital goods required by paper and paperboard industry for technological up-gradation especially aimed at environmental protection and for compliance with Corporate Responsibility for Environmental Protection (CREP) be permitted at ‘nil’ rate of customs duty.
It has also suggested that exports by manufacturers who have adopted environmentally friendly technology are granted additional incentives as cash incentive of five percent of Free on board (FOB).
Why Custom Duty on Pulp Imports
It is estimated that more than 1.25 million metric tonnes (MMT) of pulp approximately valued at $710 million (about INR 4,600 crore) is imported into India each year.
In May 2012, the Government reduced import duty on pulp from five percent to ‘nil.’ The customs duty foregone on account of these imports is estimated to be about Rs 245 crore per annum.
Consequent to the customs duty exemption, annual pulp imports are expected to increase significantly in near future to the levels of $2 billion.
To produce the quantum of pulp imported into the country currently, i.e., 1.25 MMT, more than 157 million trees are required. Basis the standard norms for conversion, production of pulp at this scale involves the employment of about 33 million man-days – comprising about 31.8 million man-days in direct plantation farming and about 1.2 million man-days in production and ancillary services.
“One of the letters to the growth of country’s economy is lack of adequate opportunities for harnessing and deploying unique demographic dividend that India enjoys vis-à-vis other economies,” said ASSOCHAM secretary general, Mr. D.S. Rawat.
“Development of plantation farming to produce raw materials for paper and paperboards industry is a readily available avenue for creating substantial employment opportunities on a sustainable basis,” said Mr. Rawat.
However, he added that potential in this regard has been completely undermined by a taxation framework wherein pulp is exempt from customs duties.
“Consequently, instead of generating sizeable employment opportunities within the country, millions of jobs are being exported to the countries from where the pulp is imported,” further said, Mr. Rawat.
ASSOCHAM has justified customs duty exemption on import of softwood pulp. “Considering that softwood cannot be grown in India thus its requirement will have to be met through import route only.”
On BCTMP, the chamber said that though it has not been available in India but a state-of-the-art BCTMP manufacturing facility was set up as part of Prime Minister Narendra Modi’s flagship programme, ‘Make in India’ which became operational in March 2017 and the project is likely to save in perpetuity substantial quantum of forex outflows that would otherwise be spent for import of BCTM pulp.
“In an era of increasing global competition it is necessary for governments and industry to work in partnership to ensure the creation of economic wealth for the nation,” said Mr. Rawat.