Industry body ASSOCHAM has urged the Centre to impose 10 percent customs duty on import of hardwood chemical pulp and bleached chemi-thermo mechanical pulp (BCTMP) to encourage domestic pulp production, provide fillip to job creation and promote overall economic development of India’s vast rural hinterland housing pulpwood plantations.
“These measures would help energise creation of sustainable sources of fibre required by Indian pulp and paper industry,” noted the ASSOCHAM pre-budget recommendations on indirect taxes submitted with the Union Government.
ASSOCHAM has also sought policy measures to be put in place to facilitate private sector participation in plantation development programmes.
Besides, the chamber has also recommended that import of capital goods required by paper and paperboard industry for technological up-gradation especially aimed at environmental protection and for compliance with Corporate Responsibility for Environmental Protection (CREP) be permitted at ‘nil’ rate of customs duty.
It has also suggested that exports by manufactures who have adopted environment friendly technology are granted additional incentives as cash incentive of five percent of Free on Board (FOB).
Customs duty on import of pulp
It is estimated that more than 1.25 million metric tonnes (MMT) of pulp approximately valued at US$710 million (about Rs 4,600 crore) is imported into India each year.
In May 2012, the Government reduced import duty on pulp from five percent to ‘nil.’ The customs duty foregone on account of these imports is estimated to be about Rs 245 crore per annum.
Consequent to the customs duty exemption, annual pulp imports are expected to increase significantly in near future to the levels of US$2 billion.
To produce the quantum of pulp imported in to the country currently, i.e., 1.25 MMT, more than 157 million trees are required. Basis the standard norms for conversion, production of pulp at this scale involves employment of about 33 million man-days – comprising about 31.8 million man-days in direct plantation farming and about 1.2 million man-days in production and ancillary services.
“One of the fetters to the growth of country’s economy is lack of adequate opportunities for harnessing and deploying unique demographic dividend that India enjoys vis-à-vis other economies,” said ASSOCHAM secretary general, DS Rawat.
“Development of plantation farming to produce raw materials for paper and paperboards industry is a readily available avenue for creating substantial employment opportunities on a sustainable basis,” said Rawat.
However, he added that potential in this regard has been completely undermined by a taxation framework wherein pulp is exempt from customs duties.
“Consequently, instead of generating sizeable employment opportunities within the country, millions of jobs are being exported to the countries from where pulp is imported,” further said Rawat.
ASSOCHAM has justified customs duty exemption on import of soft wood pulp. “Considering that soft wood cannot be grown in India thus its requirement will have to be met through import route only.”
On BCTMP, the chamber said that though it has not been available in India but a state-of-the-art BCTMP manufacturing facility was set up as part of Prime Minister Narendra Modi’s flagship programme, ‘Make in India’ which became operational in March 2017 and the project is likely to save in perpetuity substantial quantum of forex outflows that would otherwise be spent for import of BCTM pulp.
“In an era of increasing global competition it is necessary for governments and industry to work in partnership to ensure creation of economic wealth for the nation,” said Rawat.