Due to the India-Asean FTA and India Korea CEPA, tariff on paper has been tapered down to zero. Further, under the Asia Pacific Trade Agreement, India has extended import tariff concessions to China and other countries. From 10%, the basic customs duty on most grades of paper were reduced to 7%.
Even as the import duty on paper is down-pegged at a vulnerable zero rate, paper imports (excluding newsprint) have jumped up by a steep 30% in volume terms in the first half of the current fiscal. Paper mills have been quick to seek help from the Union commerce ministry, citing data released by the Directorate General of Commercial Intelligence & Statistics (DGCI&S).
From 6,84,000 tonne during H1 of 2018, paper imports have climbed up to 8,88,000 tonne during H1 of 2019. Imports from China and Asean went up by a whopping 40% and 75% respectively, in the same period.
Even as domestic industry commands more than adequate capacity to meet the demand, the country has imported paper and paper board, to the tune of Rs 5,000 crore, during the first six months of the current fiscal, IPMA (Indian Paper Manufacturers Association) said, in a communique to the commerce ministry. “Basic customs duty on paper and paper board has been progressively reduced over the years and currently stands at 0%,” the IPMA said, pinpointing the trigger for such high import volumes.
Due to the India-Asean FTA (Free Trade Agreement) and India Korea CEPA (Comprehensive Economic Partnership Agreement), tariff on paper has been tapered down to zero. Further, under the Asia Pacific Trade Agreement (APTA), India has extended import tariff concessions to China and other countries. From 10%, the basic customs duty on most grades of paper were reduced to 7%.
IPMA, it its letter, has sought “urgent imposition of measures, including hike in the basic customs duty, and review of India’s FTAs that give preferential tariff treatment to paper importers”.
AS Mehta, president, IPMA, told FE that “domestic investment will not be meaningful if imports are allowed at nil rates”. Although India is the fastest growing paper market in the world, demand growth is met increasingly by imports, with under-utilisation of existing domestic manufacturing capacity. Global trade tensions have made Indian paper industry “very vulnerable to dumping”, and importers from China and Indonesia enjoy incentives like cheap raw materials, said Mehta.
A key development that needs to be read together with the free inflow of paper imports is the growing number of small and medium paper mills in India that are bowing out of business. Out of 861 paper mills in the country, only 497 are operational, according to a status report of Central Pulp & Paper Research Institute, Saharanpur.
IPMA pointed out that the conventional markets for China and Indonesia are the US and the EU. “In both markets, anti-dumping/anti-subsidy tariffs have been imposed on import of paper/paper board from China and Indonesia. There is significant excess capacity of paper and paper board in these countries. Taking advantage of the low import duty rates, these countries find India as an attractive outlet for diverting their excess inventory,” said the letter.
Looking at DGCI&S data, the country’s paper imports have been spiralling up recently. In volume terms, the CAGR (compound annual growth rate) of paper imports in the last eight years has been as high as 14%. In the same period, the CAGR of paper imports, in value terms has been 13%, growing from Rs 3,411 crore in 2010-11 to Rs 9,134 crore in 2018-19. More noteworthy is that, in the same period, imports from Asean and Korea, surged at a CAGR of 34% and 42% respectively, in volume terms.