An increase in the basic customs duty on recovered paper, an important raw material used by the paper industry, from nil to 2.5 percent has come as a dampener.
February 1, 2022
The Union Budget 2022-23 is a growth-oriented one with a significant increase in capital expenditure to INR 7.50 lakh crore, with an effective capital investment of INR 10.68 lakh crore (4.1 percent of GDP), which will revive the investment cycle and create employment. It is clear that the government wants to sustain and stimulate the economic recovery process. Moreover, the finance minister has outlined several positive signals for the manufacturing sector which augur well for the paper industry.
We greatly welcome the statement of the finance minister that policies and required legislative changes to promote agroforestry and private forestry will be brought in. Despite the tremendous efforts of the paper industry in promoting plantations in the country, the availability of wood domestically is inadequate compared to the demand of India’s paper industry. Pioneering work has been carried out by the paper industry over the last three decades in promoting agro/farm forestry in the country. In India, an estimated 5 lakh farmers are engaged in growing plantations and around 12 lakh hectares on a cumulative basis across the country have been brought under plantations due to intensive efforts mounted by paper mills over the last several years. This has generated significant employment opportunities for the local community, especially in the rural areas, and also significantly supplemented the income of farmers and helped check the rural-urban distress migration, apart from the significant environmental benefits in terms of increase in the country’s green/tree cover, carbon sequestration, restoration of degraded land, mitigating climate change, etc. Policies and legislative changes to promote agroforestry will certainly provide a fillip to the efforts of the paper industry.
However, an increase in the basic customs duty on recovered paper/wastepaper, an important raw material used by the paper industry, from nil to 2.5 percent has come as a dampener. The industry is passing through challenging times and is hard-pressed for raw materials in view of supply-side constraints. An increase in duty on wastepaper will add to the production cost. Since the domestic paper recovery rate in India is around only 40 percent as compared to over 70 percent in developed countries, import of recovered paper or waste paper is necessitated for domestic value addition to meet the growing demand for paper in the country. Any imposition of import duty on recovered paper or wastepaper is not justified till the time that the collection and recovery of waste paper in the country does not increase significantly through efforts by all stakeholders.