In a memorandum sent to the finance minister, the industry has pleaded for the abolition of customs duty and special additional duty on waste paper to make units competitive and prevent their closure.

Speaking to The Financial Express, executive secretary, All India Small Paper Mills Association (ISPMA), RN Khurana said that out of the three categories of paper being produced in the country, waste fibre paper manufacturers are the only ones who have to depend on raw material imports.

"Our input cost is highest among the lot. We were already reeling under pressure due to high customs duty when the government went ahead and slapped a surcharge."

As manufacturing of paper out of waste fibre requires relatively lower levels of inputs of scarce materials like power, coal and water, Khurana feels that the governmentshould give special incentives to the sector. "We cause the least pollution, yet we stand ignored."

Khurana says that it is very difficult for small manufacturers to dole out 9.7 per cent ( basic duty 5 per cent plus SAD 4 per cent plus 10 per cent surcharge) of the total value of imports as customs duty. "Besides competition from agro and wood paper manufacturers, we have to deal with the unfair competition posed by foreign paper which is imported into the country in the guise of newsprint."

Unable to cope with high costs, more than 100 small units have already closed shop, says Khurana. If more closures are to be prevented then the government should wake up to our needs, he adds.

Khurana feels that the decision not to allow any zero-duty imports is constructive but its applicability to raw materials is not justified as it would adversely affect the development of the domestic industry.

He argues that is unfair that newsprint, both standard and glazed, are finished products and attract only 5 percent customs duty whereas waste paper which is input for manufacture of newsprint attracts a much higher slab.

"This is an anomalous situation where the government is encouraging import of finished products while discouraging the import of raw material. If our sector is given proper encouragement then the domestic shortfall of 2-3 lakh tonne of newsprint can be met significantly saving precious foreign exchange."

Like their counterparts in the agro paper industry, ISPMA has also asked the finance minister to roll back excise duty from 8 per cent to 5 per cent. Khurana says that excise was previously fixed at 5 per cent for small mills as they were facing acute financial burden and were considering closing shop. "It is surprising that despite the fact that the situation has worsened due to steadily increasing input costs, we are being asked to pay higher excise."

Waste fibre paper manufacturers account for 58 per cent of the total paper manufactured in the country. Khurana says that if the governmentdoes not take any action to improve the situation for the sector then large scale sickness is inevitable which will upset total production.