Paper industry hit by rising manufacturing costs

July 27th, 2008 - 2:54 pm ICT by IANS  

Agra, July 27 (IANS) The Indian paper industry is faced with rising manufacturing costs and increasing tax-related complexities, dealers said at an ongoing national conference that began here Saturday. Manufacturing costs had gone up and paper mills were logging huge losses for the past one year, packaging paper manufacturer Khatema Fibres chairman R.C. Rastogi said at the three-day national conference, convened by the Federation of Paper Traders’ Associations of India (FPTA).

“Not only raw material costs, but also shipping costs, shortage of containers and power supply are adversely affecting the (paper) manufacturing sector,” he said.

Rastogi warned that the crisis would deepen following a shortage of bagasse that is being increasingly used to generate power.

Another ingredient for paper manufacturing, paddy husk, is also being diverted to the energy sector for firing boilers.

More than 600 dealers from across India are participating at the conference that ends Monday.

FPTA president Arvind Sharma said increasing newsprint prices were goading paper mills to switch over to newsprint production.

The price rise, he said, was on account of a demand-supply gap: consumption has gone up to two million tonnes annually against a production of 1.2 million tonnes, with the shortage being met through imports.

The “abnormal” price hike by the paper mills had hit consumers and was bound to impact the country’s literacy programme, according to Vinod Gupta, general secretary of the Agra Kagaz Vyapar Mandal, the association of city-based dealers.

Paper dealers said they were particularly foxed by the anomalies in the tax structure and rates. Value-added tax (VAT), they said, was not being uniformly enforced.

For instance in Uttar Pradesh, paper mills were given a four percent excise duty cut in the latest budget, but this was not being passed on to consumers, they said.

The present demand pressure is being driven by the communication and packaging sectors, according to leading paper dealer R.C. Gupta. But the Internet and plastics would eventually affect this trend, he added.

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