Date:27/01/2005 URL: http://www.thehindubusinessline.com/2005/01/27/stories/2005012700840200.htm

Back Paint industry seeks cut in customs duty

Our Bureau

New Delhi , Jan. 26

WITH prices of key raw materials having risen by 15-50 per cent in recent months, the domestic paints industry, in its pre-budget memorandum, has made a number of suggestions to help ease the pressure on the industry's bottomline.

According to the Indian Paint Association (IPA), the recent astronomical price rise in crude oil has increased input costs of raw materials and containers, resulting in an increase in the final cost of paint.

"Prices of raw materials have risen by 15 to 50 per cent. The small-scale paint manufacturers have found the input costs to be far too substantial and have been unable to increase the prices of the finished products commensurately. The margins have eroded, and in many cases, the viability of the smaller units is at stake," the association has said. Additionally, while the industry grew by 12 per cent in 2003-04, the growth rate slowed down during the current financial year, with the expected growth pegged at about 9 per cent. These two factors, according to analysts, have intensified competition in the market place and will affect profitability of the industry.

In its memorandum, the IPA has said that for industrial coatings, the import content of raw material used is almost to the extent of 60 per cent while for architectural coatings it is between 20-40 per cent. "Today both raw materials and paints attract the same basic customs duty. This is not justified. The duty on raw materials should be at least 15 per cent less than the duty imposed on finished paints," it has said.

Further, IPA has stated that currently MRP-based assessment extends to products in the paint industry. Paint companies also manufacture and market powder coatings but these are not covered by the MRP system. "This has put the paint industry in an anomalous situation," it said.

IPA felt that there are certain limitations in VAT that could lead to complications and complexities. The paint industry, more particularly the small units, fears that unless a thorough review of laws and procedures of VAT is made, it could have an adverse impact.