ISLAMABAD, May 30: Cement and sack paper manufacturers opposed any increase in import duty on finished paper sacks during a public hearing held by the National Tariff Commission here on Friday.
The move had been initiated by the makers of paper sacks, who had requested that the duty on raw material of these bags be halved from the present rate of 20 per cent and that on finished product it be raised from 25 per cent to 35 per cent for saving the local sack industry from the unfair competition arising from only 5 per cent difference between the two products.
In the public hearing chaired by NTC member Ikram Arif, the cement industry was represented by retired bureaucrats, including a federal secretary, a provincial secretary and a joint secretary.
Representative of Pakistan Papersack Corporation, the applicant, said high quality sack paper was made out of the pulp of a tree grown in northern climates of Sweden, Poland and Bulgaria. Lately, however, Bulgaria had started exporting paper as well as made-up paper bags which had created disadvantageous position for the local industry.
Contesting the claim by sack makers to being “industry”, however, the representative of Flying Kraft Paper Mills, Charsadda, Mr Kamran, said their work comprised only cutting and pasting of paper. While his factory was also producing raw material of sack paper from a mixture of imported kraft pulp and local waste material.
He said his paper production capacity was 40,000 per ton per annum. However, he was able to utilize only 30 per cent capacity because the sack makers used only imported stuff. Until the government drastically reduced duty on raw material, it was the paper produced by his factory which was used for making bags.
In case, the government now also reduced the duty on paper still further, his industry would find its unable to compete with cheaper material and be closed down, he contended.
Quoting figures, Mr Kamran alleged that the sack makers were making windfall profits as evident from the fact that the price exacted by them was Rs62,500 per ton of paper bags, while Flying Kraft charged only Rs48,000. Thus, they were making a phenomenal profit of over Rs14,000 per ton. The sack makers were now out to increase their profits still further, he added.
Asserting that they are the main consumers of paper bags, the cement industrialists charged that many bag manufacturing plants mixed imported ply and paper with locally made ply. They presented a memorandum which showed that Pakistan Papersack and Cherat Papersack earned huge returns ranging up to 85 per cent and 218 per cent, respectively, during the period 1996-2002.
The total capacity of all cement units is 17.85 million tons per annum. During the first four months of 2003, they had produced over 3.8 million tons. As the local industry could not fulfil this demand, the cement industry had to import the bulk of its requirements of sack paper from abroad. The industry representative, however, did not mention the quantity of such imports.
The landed cost of imported paper bags is Rs10.50 per bag without GST, as compared to the price of local manufactured paper bags — Rs12 — without GST. “In our opinion, if the rate of import duty on raw paper is reduced, then the same reduction be applied to the paper bags, otherwise it will have a direct effect on the cost of cement,” the memorandum stated.
The representative of Central Board of Revenue presented the view that the difference between prices of imported bag and locally made product was negligible and that, therefore, there was no warrant for increase in duty. Moreover, he stated, the CBR was opposed to any change in the duty structure.
In response to the participants’ request, the Commission gave the parties interested in the paper bag industry until June 15 to send to it any further data they considered necessary to strengthen their case.