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Sindhu J. Bhattacharya

New Delhi , Feb. 18

THE Rs 15,000-crore domestic paper industry has sought rationalisation of excise duty and its reduction to 8 per cent, so as to remain competitive.

Till recently, the industry was taxed at a flat excise duty rate of 16 per cent, regardless of the size of the mill, the raw materials used or any other criterion.

However, last year the Centre amended the excise duty provision clause for this industry to introduce a 12 per cent slab. As per this notification, paper and paperboard articles made from pulp - where the pulp itself is not derived from bamboo, hard or soft woods, reeds or rags - would be levied four percentage points less excise at 12 per cent.

However, this concession was conditional as only manufacturing units that had no attached plant for making pulp could avail themselves of it. Taken with the condition on pulp-making, this provision made almost all large mills ineligible for the four percentage point excise relief.

A few months ago, the Centre introduced another amendment to the excise provision, which left only the State-owned Hindustan Paper Corporation eligible for paying even lower excise of 8 per cent.

This differential in duties paid by different categories of paper manufacturers has hurt the industry's growth prospects, says the JK Paper Managing Director, Mr Harsh Pati Singhania. "A 4 percentage point excise duty differential translates to Rs 1,200 per tonne excise payout. All the large, integrated mills are still paying excise duty at the highest 16 per cent rate and this duty structure should be rationalised so that there is a single rate of 8 per cent."

Besides excise duty rationalisation, the Indian Paper Manufacturers' Association has also requested the Government for de-reserving the paper sector from the restrictive list meant for the small-scale sector to enable the industry to establish forward and backward linkages.

Paper manufacturers contribute about Rs 2,500 crore to the exchequer in excise and other taxes every year. The industry is expected to produce 60 lakh tonnes this fiscal against 55 lakh tonnes in 2003-04.

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