The Hindu Business Line : Paper industry sees gains from Budget proposals

`Industry had expectations that Mr Chidambaram would consider excise duty reduction on paper and paper products in order to neutralize at least a portion of the financial burden due to the increased cost of fuels and higher costs of almost all raw materials'

A FILE PICTURE of stock point at Rayalaseema paper mill near Kurnool. - U. Subramanyam

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Kolkata March 4 Domestic paper mills producing cultural varieties of paper (writing and printing) are confident that they will stand to gain with the enhancement of budgetary allocation for the education sector and the higher provision of funds for the Sarva Shiksha Abhiyan programme.

They feel that the buying support for writing and printing paper will increase from student communities and also from various educational institutions and textbook publishers following the increased fund allocation.

The Union Finance Minister, Mr P. Chidambaram, in his Budget for the year 2007-08 has proposed to enhance allocation for the education sector by 34.2 per cent to Rs 32,352 crore, and the allocation for school education by 35 per cent from Rs 17, 133 crore in 2006-07 to Rs 23,142 crore. Out of the funds allocated to school education, about Rs 10,671 crore will be provided for Sarva Shiksha Abhiyan.

Mr Raji Philip, President of the Indian Newsprint Manufacturers Association and a senior executive committee member of the Indian Paper Manufacturers Association (PMA) told Business Line that the higher allocation would definitely push up the demand for writing and printing paper in the coming months. Though this development was quite encouraging for paper mills, the lowering of peak customs duty from 12.5 per cent to 10 per cent coupled with the unchanged excise duty structure might have a dampening effect on the financial viability of many large and medium paper mills. It was apprehended the landed cost of imported coated and packaging papers might now be cheaper as compared to the same varieties of domestic paper. This might force domestic manufacturers to reduce prices of specialty papers to retain their share both in the domestic and international markets.

Mr Philip, who is also Chairman of the State-owned Hindustan Paper Corporation (HPC), said that the paper industry had expectations that Mr Chidambaram would consider excise duty reduction on paper and paper products in order to neutralise at least a portion of the financial burden estimated due to the increased cost of fuels and higher costs of almost all raw materials.

Large and medium paper mills would be forced to revise prices of paper and paper products by Rs 500 to Rs 1,000 a tonne.

Although prices of paper and paper products were revised a couple of times, further revision might be absorbed by the market because of a consistent gap between demand and supply.

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