16-09-2016

1

Indian Paper Manufacturers Association (IPMA)

New Delhi, India

1

Industry Overview (1/2)

2

Industry manufactures (1) Writing & Printing Paper, (2) Paperboard / Packaging Paper, (3) Newsprint, (4) Specialty Paper, and (5) Others

Industry has strong backward linkages with the farming community and has agro forestry roots

Compliant with Government’s Environment Charter

Annual turnover of around INR 50,000 crores

Industry provides direct employment to 5 lakh persons, and indirectly to 15 lakh

Number of Mills: 750-800

16-09-2016

2

Industry Overview (2/2)

3

India’s share in world production of paper is currently about 3%

Per capita paper consumption in India is currently around 13 kgs(global average 57 kgs), projected to rise to at least 17 kgs by 2024-25

In the last 5 years, over INR 20,000 crores invested by paper industry in new capacities

1 million TPA of integrated pulp, paper and paperboard capacity has to be created in India on an annual basis over the current capacity to meet the growing demand

Investment required by 2026 in new capacities at least INR 90,000 crores

Major Area of Concern - Raw Material Scarcity

4

India is a fibre deficient country - inadequate raw material availability domestically is a major constraint for the paper industry

Current demand for wood by paper industry is about 11 million TPA (against domestic availability of 9 million TPA) and is projected to rise to 15 million TPA by 2024-25

90% of wood demand met through industry driven agro / social forestry; 10% through Government sources and imports

Scarcity has led to high wood prices in the country – More than doubled in last three-four years

16-09-2016

3

Rising Imports of Paper, Paperboard & Newsprint

5

5 Year CAGR: 8%

5 Year CAGR (excluding Newsprint): 16%

Nil BCD under India-ASEAN FTA

5 Year CAGR (excluding Newsprint): 39%

1,785

2,1262,028

2,2542,347

2,610

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Th

ou

san

d T

on

ne

s

Year

Imports of Paper, Paperboard & Newsprint (DGCI&S)

6

1. Retention of Peak Rate of Customs Duty on Paper &

Paperboard� Indian paper industry has become very vulnerable and endeavour of major

global players in the international market is to push large quantities of paper

and paperboards into the Indian market.

� Leading the pack are manufacturers in Indonesia and China who enjoy

substantial amount of export incentives and other advantages.

� USA and EU have imposed anti-dumping / anti-subsidy tariffs on import of

paper / paperboards from China and Indonesia to protect their domestic

industries.

� Export dependant economies like ASEAN countries have excess capacity and

these countries find India as an attractive outlet for diverting their excess

inventory (Nil basic customs duties under the India-ASEAN FTA).

Recommendation

Government should retain the current import duty structure (BCD of 10%) to

save the domestic paper industry from injury arising out of unbridled imports.

Paper and paperboard should be kept in the negative list in all FTAs, bilateral and

multilateral agreements to check rising imports, especially from ASEAN

countries.

16-09-2016

4

7

2. Exemption of Special Additional Duty (SAD) on Import of Pulp and

Other Inputs by the Paper Industry

� In the Union Budget for 2015-16, exemption of SAD on inputs to be used by

various industries was announced so as to provide relief on accumulation of

CENVAT credit. Pulp & paper industry is a highly capital intensive industry

where input credit on capital items is substantial and on top of it, 4% SAD is

levied on import of pulp which further accumulates CENVAT credit, resulting

into blockage of working capital.

Recommendation

Government should favourably consider the exemption of SAD on import of pulp

(Chapter 47) and other inputs by the pulp & paper industry.

8

3. Reduction in Applicable Rate of Excise Duty on Tissue / Toilet

Paper

� Applicable rate of excise duty on most items of paper and paperboard is 6%,

but the rate of excise duty on toilet / tissue paper has been kept at 12.5%.

� Tissue / Toilet Paper (HS Code 48030010 and 48030090) which are

manufactured under strict hygienic condition, are widely used institutionally,

viz. hotels, hospitals, railways, airlines, offices, tourism industry, information

technology and by millions of hygiene conscious consumers. Considering its

potential for growth and its importance being bio-degradable, a hygiene and

convenience product, the tissue segment of the paper industry does warrant

fiscal support from the Government.

Recommendation

Government should bring all grades of paper, including Tissue / Toilet Paper (HS

Code 48030010 and 48030090), on par with respect to the applicable rate of

excise duty (6%).

16-09-2016

5

9

4. Reduction in Applicable Rate of Excise Duty on Paper and

Paperboard, coated, impregnated or covered with plastics, excluding

adhesives

� Applicable rate of excise duty on most items of paper and paperboard is 6%,

but the rate of excise duty on paper and paperboard, coated, impregnated or

covered with plastics, excluding adhesives, has been kept at 12.5%.

� Paper and Paperboard, coated, impregnated or covered with plastics,

excluding adhesives (HS Code 48114900) are coated with layer of plastics on

either one or both sides. This coating to the paperboard / paper imparts

barrier properties and make it suitable for packaging / containers for foods

and beverages. This type of board is bio-degradable and a good substitute for

plastics which do not match the hygiene and environmental standards of this

type of boards / paper. Globally, the trend is to actively discourage the use of

plastic and support its replacement with paper / paperboard material.

Recommendation

Government should favourably consider to bring all grades of paper, including

paper and paperboard, coated, impregnated or covered with plastics, excluding

adhesives, (HS Code 48114900), on par with respect to the applicable rate of

excise duty (6%).

10

5. Make the Clean Energy Cess levied on Coal, if used for Power

Generation, Cenvatable

� The levy of Clean Energy Cess on Coal @ INR 200 per tonne was increased to

INR 400 per tonne in the Union Budget for 2016-17. In case of pulp & paper

industry, coal is being used for power generation and such an increase, in

addition to increase in the railway freight, has made a significant impact on

the cost structure of the industry. Pulp & paper industry is finding it difficult

to absorb the same as it is not in a position to pass on the above impact in

view of competitive pressure as well as import of paper & paperboard at nil

duty from ASEAN countries.

Recommendation

Government should favourably consider making the Clean Energy Cess levied on

Coal, if used for Power Generation, Cenvatable, so that to at least this extent, the

energy cost remains at a competitive level.

16-09-2016

6

11

6. Concessional (Merit) Rate of GST on Paper & Paperboard Industry

� To promote literacy in the country, it is essential to keep writing & printing

paper affordable to the masses.

� Paper & paperboard provide a much more environment-friendly and better

packaging material than alternate material like plastic.

� It is very important that post the implementation of GST, the prices of paper

and paperboard remain affordable to the people.

Recommendation

Government should favourably consider levy of Concessional (Merit) Rate (which

could be around 10%) of GST on paper and paperboard, rather than Standard

Rate.

1