The Hindu Business Line : Paper manufacturers pass on benefit of excise duty cuts

Chennai, Dec. 15 The reduction in excise duty has helped manufacturers effect a much-needed drop in prices against the backdrop of a slow market and fears of imports, according to leading manufacturers.

Paper manufacturers across the board have transferred the 4 per cent reduction in excise duty announced recently by the Centre.

Seshasayee Paper and Boards Ltd has announced in the stock exchange that it has revised prices of its entire range of printing, writing and kraft paper by about Rs 1,600-2,000 a tonne.

According to industry sources, this reflects the general trend. The list price has been revised by most of the leading paper mills, with prices in line with the drop in excise duty, they said.

In November, creamwove range of papers was around Rs 50,000 a tonne and this has now been revised to about Rs 46,000 to Rs 48,000 depending on the mills and the quality. Mill-pack copier paper, which was about Rs 50,320 a tonne, is now about Rs 48,000.

Impact on packaging

Demand has been most affected in the kraft and duplex board range which are used in packaging material. The drop in the manufacturing segment has had an impact on packaging and this in turn has hit this segment hard, they said.

Domestic manufacturers are waiting for New Year when demand for the academic season starts. Year-end is usually a slow season, but with the New Year, notebook manufacturers start gearing up for production to meet the demand from educational institutions which will start notebook and textbook sales in June.

Demand is expected to pick up in the later half of January, which will perk up the market. This is a crucial feature for the paper industry — a slowdown may affect housing and infrastructure but education is always a priority, they say.

Price cuts

But for now, it is off-season and sales have been hit. Last month, the mills had maintained that they could not afford to lower prices because of the earlier increases in input costs. They had been resisting a cut in domestic prices even as they corrected export prices in line with the international markets.

As of November, the international market for paper was down by about $100-150 a tonne from about $950 in September. Manufacturers in South East Asia led the price cut by dropping to about $700 a tonne on the printing and writing paper range.

Under the circumstances, domestic paper mills simply cannot but pass on the benefit of excise duty cut. Apart from the market slowdown, the drop in international prices and freight rates, and the strengthening rupee contribute to increasing imports.

Also, the excise duty reduction means a matching cut in countervailing duty on imports. Imports of printing and writing paper have started — it is a trickle now — but manufacturers have to watch out for it.

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