Pre Budget Analyis
Paper: Impose safeguard duty on select paper varieties and hike customs duty
Due to increased dumping of paper, the domestic players are vulnerable; so they seek hike in customs duty and / or safeguard duty be imposed, cut customs duty on inputs like pulp, coal etc
Current Status The global paper demand has turned very sluggish. The excess supplies globally are being dumped into various countries, including India. This dumping of paper is affecting the Indian paper sector, which is in the midst of massive capacity additions. Due to recession in America and in Europe, there is a contraction in demand. As a result of several paper mill have closed in North America and Europe. Despite closing of mills, there was also fall in demand for paper. This contraction in demand has lead to huge inventory pile-up and a sharp fall in prices in international market. As a result, the countries like China, Indonesia, Finland, Sweden, Germany and the US started to export their product to countries like India, where the demand continues to grow.The paper industry is targeting a capital expenditure of over Rs 13,000 crore in the next 2-3 years, towards capacity expansion, modernization and enhancement of efficiencies. Over the next one and a half years, at least 6.5 lakh tonnes of additional annual capacity is expected to go on stream in the domestic market. But due to global economic recession, few companies have put their projects on hold. The industry is keeping its fingers crossed on the market improving in the coming years to support a faster pace of absorption
1. Imposition of 20% safeguard duty on select varieties of paper falling under HS Codes 4802 and 4810 of Chapter 48 of customs tariff manual.
2. To enhance the peak rate of basic custom duty (BCD) from 10% to 15% on paper/paperboards along with re-introduce component of special additional duty.
3. Rate of BCD on import of wood pulp, waste paper and coal, which are the inputs to industry.
4. Looking for restoration of OGL status for import of Recyclable Waste Paper free from impractical conditions that impair import.
5.With the reduction in excise duty announced during the stimulus package, the amount that can be availed as CENVAT every year has also reduced very significantly, thus acting as a disincentive for fresh capital expenditure. As a result, the industry wants the excess amount of un-availed Cenvat Credit should be permitted to set-off against any other Central levies viz. custom duty on imports, minimum alternative tax, income tax etc, government to issue bonds similar to oil bonds to the extent of un-utilized Cenvat Credit which companies can sell in the market and after completion of a period of two years as envisaged under the Excise Rules, the remaining Cenvat Credit may be refunded to the concerned manufacturing units in cash.
6. The industry also want depreciation rate to be restored to the earlier rate of 25%.
7. There still exits multiple duty entitlement pass book (DEPB) rates, which is causing discomfort to exporting mills. To achieve success in export market, the industry wants the Government to disband multiplicity, rationalize and apply a uniform DEPB rate of around 12% to all varieties of paper/paper boards.
Source: Capital Market