Kraft Paper Industry appeals Government for abolishing customs duty

Chennai - March 3, 2010: The Kraft Paper Mills in Southern India are on a brink of collapse, because the price of imported raw material ie Brown grades has gone up from US $ 170 to 290/t and it is likely to go up further. The local raw material costs are spiraling up adding fuel to the fire. The increase in diesel prices has compounded the problem and power tariff increase has complicated the issue further.

There are 94 paper mills in South India, comprising of 40 in Tamil Nadu and Pondicherry, 30 in Andhra Pradesh, 15 in Karnataka and 9 in Kerala. Together they produce 10 lakh tonnes of Kraft paper per annum and employ 3 lakh people directly and indirectly. The mills capacity varies from 5 tonnes per day to 200 tonnes per day.

The mills have been facing a difficult situation because the price of Kraft paper has remained virtually stagnant in the last ten years, whereas, all input costs have gone up tremendously. To mitigate the impact of rising costs, mills in North and West India have increased their prices by Rs.2500 to Rs.3500 per tonne from February 2010. The mills in South are also considering an increase between Rs.1000 to Rs.1500 per tonne with immediate effect.

Briefing the media, President of South Indian Kraft Mills Association Mr. SR Rabindher said that the situation is quite bleak and appealed to the Government to step in and help the ailing mills by abolishing the customs duty for import of waste paper / prime raw material.

Mr. K. Swaminathan, Secretary, added that they have represented to the Government the Technology Upgradation Fund (TUF Scheme) of Rs. 3000 Crores, as a measure to upgrade technology for better valuation and cost effectiveness. He however felt, this was not enough, since there is severe shortage of experienced staff and skilled labour, which has forced mills to increase the wage bill by over 200%. The fear of fibre shortage in future is very real and will result in mills not able to utilize their capacity to the fullest. If there is no immediate action from Government many mills will closed down resulting in huge labour force going out of work.

Source : Equity Bulls

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