Basic customs duty on wood chips or particles removed

Basic customs duty (BCD) on wood chips or particles for manufacture of paper, paperboard and news print being removed from 5%. This is positive news for paper manufactures like Ballarpur Industries, West Coast Paper Mills, Tamil Nadu Newsprint & Papers and JK Paper. Since, wood chips are primary raw material for paper industry; reduction in BCD will help them to reduced their raw material cost and lift their operating margin.

Nil BCD will marginally reduce the cost of raw material as print companies currently import 25-30% newsprint. 

BCD on Plans, drawings and designs being increased from Nil to 10%

Stock to watch

Ballarpur Industries, West Coast Paper Mills, Tamil Nadu Newsprint & Papers and JK Paper.

Outlook

India is a wood fibre deficient country, with the domestic demand-supply gap in wood widening every year. Raw materials constitute 35-40% of cost of paper production. Currently, the wood and bamboo demand of the country's Pulp & Paper Industry is around 11 million tonnes against availability of 9 million tonnes per annum. The demand is expected to increase to 15 million tonnes by 2024-25.

India being a fibre deficient country, indigenous paper manufacturers are forced to use a variety of raw material such as wood, agro-residues, waste paper, etc. Because of this reason the domestic paper producers import substantial quantities of wood pulp and waste paper to meet the raw material deficit.

On account of the significant demand-supply gap in respect of the primary raw material for the industry, the cost of wood has gone up exponentially over the last few years. Shortage of supply with exponential rise in prices of wood is adversely impacting the competitive edge of the industry and the domestic manufacturers are ceding ground to cheaper imports. It is therefore, important to bring down the cost of domestic as well as imported raw material. BCD exemption on wood chip is positive news for paper industry.

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