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Run-up to the Budget: Paper

State of industry (2000-01)

• Demand for paper is expected to increase by 6.5 per cent, due to stable economic growth, an increase in industrial production, and increased spending on advertisements by corporates.
• Supply is expected to increase by 9.7 per cent due to an increase in operating rates.
• In the writing and printing segment, prices are expected to increase due to an increase in domestic and export demand. However, in the industrial segment, prices are expected to increase marginally, as supply continues to exceed demand.
• Landed costs of waste paper and pulp are expected to increase due to an increase in prices in the international market. In the second half of 2000-01, pulp prices declined due to a slow-down in paper demand in the US.
• Margins of domestic writing and printing paper mills and large industrial paper mills are expected to increase, due to an expected increase in writing and printing paper prices.. Margins of small paper mills in industrial paper are expected to decline as they would be unable to pass on the increase in raw material costs to consumers.

Industry expectations from the Union Budget (2001-02)

• A reduction in the excise duty: The Indian Agro and Recycled Paper Mills Association has been asking for a reduction in the excise duty on paper manufactured from agri-residue and waste paper based mills, to 8 per cent as compared with the existing excise duty of 16 per cent. The Indian Paper Manufacturers Association has been asking for a standard excise duty of 16 per cent.
• An increase in the import duty: The industry has asked for an increase in the import duty on paper from 35 per cent to 40 per cent, in line with the WTO bound rate. In the case of newsprint, the industry has asked for an increase in the import duty from 5 per cent to 25 per cent.

	Tariffs (per cent)				Domestic prices		International prices		Landed cost
	1999-2000		2000-01		(Rs/tonne)		($/tonne)		(Rs/tonne)
	Customs	Excise	Customs	Excise	Price type	Jan 2001	Price type	Jan 2001	Jan 2001
Newsprint	5.5	0.0	5.5	0.0	Ex-factory1	30,700	cif Mumbai2	710	34,904
Maplitho	38.5	16.0	44.0	16.0	Market	34,707	cif Mumbai	725	57,516
Duplex board	38.5	16.0	44.0	16.0	Market3	27,725	cif Mumbai	500	39,666
Art Paper	38.5	16.0	44.0	16.0	Market	44,745	cif Mumbai	850	67,433
Art Board	38.5	16.0	44.0	16.0	Market	45,815	cif Mumbai	825	65,450
Wood Pulp (hard)	5.5	0.0	5.5	0.0	-	NT	cif Mumbai	470	23,543
Wood Pulp (soft)	5.5	0.0	5.5	0.0	-	NT	Cif Mumbai	550	27,550
Waste Paper (OCC)	5.5	0.0	9.7	0.0	-	5,400	Cif Mumbai	115	5,880

NT: Not traded; OCC: Old corrugated container
n.a.: Not available
1 49 GSM (81.5 cm)
2 Canadian Newsprint
3 Duplex Paperboard White (NV): 200-284 gsm, for wood based board

Notes: BR>

1. For 2000-01, the landed cost and customs duty include the SACD of 4 per cent, effective since 1999-2000. In 1999-2000, the SACD was applicable only for non-traders, and hence, has not been included in the customs duty.
Market prices include excise duty, and are net off trade discounts.

Compiled by CRIS INFAC

Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

Rediff-CRISIL Budget Impact Analysis

Budget 2001

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