Regulatory duty on Kraft paper withdrawn

The government has withdrawn 5 percent regulatory duty on sack Kraft paper (SKP) despite strong opposition by the Ministry of Industries and Production (MoI&P). Official documents obtained from MoI&P suggest that the issue was placed before the Economic Co-ordination Committee (ECC) of the Cabinet in its meeting on November 4, 2010 and the ECC was informed that the manufacturers of sack Kraft paper (SKP) have requested for withdrawal of 5 percent RD on SKP falling under customs tariff heading 4804.2100 and 4804.2900.
This duty was imposed in the budget to give some protection to the local SKP industry. After imposition of RD on raw material, total incidence of duty on SKP (raw material) and bags (finished product) is 20 percent and 25 percent, respectively.
This provides a spread of only 5 percent between raw material and finished product, thereby creating anomalous situation for local manufacturers of SKP. Trend of import of SKP in financial year 2008-09 was 25.37 percent and the unit value increased by 41.4 percent over the financial year 2007-08. Thus, both in terms of quantity imported and the value of imports there is hardly any adverse impact on the local industry. The All Pakistan Cement Manufacturers Association (APCMA), as a direct stakeholder in the issue, pointed out that against total demand of SKP--55,000 tons--approximately 5000 tons (9 percent) is being manufactured locally, catering to partial requirement of 2-4 mills only, while other units are dependent on cement sacks, manufactured from imported SKP. Thus, on the touchstone of local production to import ratio, the imposition of RD was not justified.
Sources said that the Engineering Development Board (EDB) had also supported withdrawal of RD on the ground that there was already a spread of 15 percent duty available to local manufacturers of SKP as most of the basic raw materials of paper industry are importable at zero percent. But RD imposed on SKP had narrowed down the spread between SKP raw material and finished product, putting the entire SKP bag manufacturing industry at a disadvantageous position.
Revenue Division, therefore, proposed that 5 percent RD levied on SKP (PCT headings 4804.2100& 4804.2900) may be withdrawn for SKP bags manufacturers. The Ministry of Commerce and Board of Investment had supported the proposal, whereas the Ministry of Industries and Production had suggested taking up the matter in the next budget. During discussion, it was observed that it would not entail substantial financial implication, if the government withdrew 5 perRD on sack Kraft paper.