PULP FICTION

Calcutta, March 1: Prices of writing and printing paper are likely to come down by Rs 1,500 to Rs 2,000 per tonne after Chidambaram announced a 4 per cent excise duty cut on mills using non-conventional inputs.

Mill owners, who use waste paper as the main input, expect prices to come down to around Rs 38,000 per tonne from Rs 40,000 per tonne. According to industry circles, the move to bring down excise duty to 8 per cent from 12 per cent on paper mills that use non-conventional material is a correction in the duty structure.

In last year’s budget, the excise duty on units using wood pulp was reduced to 8 per cent from 12 per cent. This left out a large segment of the industry that used waste paper. Around 84 per cent of paper, paper boards and map litho papers use waste paper as the primary input. The move to bring down the duty will certainly have a sobering effect on prices, said city-based paper trader Ram Avatar Agarwal.

Agarwal, who had recently entered into paper manufacturing and took over India Paper Pulp, said paper prices during 2007-08 had risen by Rs 4,000 per tonne. The price rise was mostly because of an increase in the prices of imported waste paper, coal and chemicals, which are used to make paper and paper boards.

However, Sailesh Gupta, director of Unitech Paper, expressed doubt if the industry would be able to pass on the excise duty cut to consumers.

Gupta said the prices of imported waste paper had gone up to $360 per tonne from $180 per tonne. Coal prices became dearer by 40 per cent during the year. The prices of chemicals such as chlorine, alum, caustic soda had also gone up, making it difficult for mill owners to pass on the duty cut.

Paper trade circles, however, feel there may be resistance from consumers if the duty cut is not reflected in market prices. According to Agarwal, waste paper prices may have risen, but there had also been a drop in the value of the dollar. This will make it possible for manufacturers to pass on the benefit of the cut to consumers.