The industry wanted immediate reversal of the new duty structure wherein duty on sack kraft paper has been revised from 10 to 15 percent and on granules reduced from 10 to 5 percent.
All Pakistan Papesack Manufacturing Association (APPMA) Chairman Shaukat Masood in a fax message to newspapers on Monday said that the papersack manufacturing industry strongly protests against the increase in duty on its raw material and feels that the government has taken U-turn on its policy pertaining to sack craft paper to favour two industries owned by the ruling elite.
He claimed that the benefit of change in duty would go to Sentrox (Pvt) Limited and Nova Poly Industries, and hit hard around one dozen papersack manufacturing units which pay millions of rupees to the national kitty in the form of taxes every year and provide jobs to hundreds of families.
He said that duty on sack kraft paper and granules has been changed on the recommendations of budget anomaly committee, which did not bother to hear papersack manufacturers' point of view.
Sack kraft paper is raw material of the paper sack manufacturers for producing cement bags, whereas polypropylene granules are utilised by a couple of manufacturers who produce polypropylene cement bags.
Both industries have the same customers and the market of cement manufacturers.
The custom duty on both sack kraft paper and polypropylene granules was reduced in last budget to 10 percent from 20 percent and the step was taken to curb heavy import of cement bags into Pakistan.
According to official statistics, cement bags import was over 12 million in the second half of 2002-03. This trend was disastrous for the local cement bag industry.
A public hearing was held by National Tariff Commission wherein all the stakeholders were invited and on its basis the government took a well-considered decision to cut down duty on sack kraft paper for the survival of local cement bag industry.
Shaukat called the change in duty as a complete surprise to the paper sack manufacturers and said that upward revision in duty on sack craft paper was arbitrary and unjustified when hardly any anomaly really existed for the sector.
The chairman added that the decision of the anomaly committee was totally biased towards paper sack industry and meant to favour the manufacturers of environmentally harmful polypropylene bags at the cost of paper sack industry.
He said that the revision in duty for papersack industry was negation of declared government policy of providing level playing field to all the stakeholders of a sector and the increase would hit hard paper sack industry.
He deplored that the government was providing undue shelter to polyproplene industry when the world is moving away from plastics towards the natural products the PP bags were introduced in Pakistan few years back by a couple of private limited companies which have doubled their production capacities in few years and now they are on drive to kill the paper sack industry.
Large paper sack manufacturing units were listed on stock exchanges and increase in duty would adversely hit shareholders and small investors.
Reduction in import duty in the budget had resulted in lowering down of paper sack prices but now upward revision just in two months would increase the rates of packaging material for cement and thus increase the cement prices for end consumers.
An important cornerstone of this government's policy is to bring a degree of stability in its fiscal policies so as to provide assurance to the industrialists that Pakistan is a safe country to invest in.
Now when paper sack manufacturers have imported thousands of tons of paper on the assumption that custom duty will remain at 10 percent, and they will be able to compete on equal terms with the imported cement bags and PP bags the government has changed the equation out of the blue.
This is sure to erode the confidence of businessman in the governments policies and its seriousness towards encouraging investment in the country.
For the sake of fairness and providing even playing field the government is requested to reconsider its decision and reduce the duty on sack kraft to the same level as polypropylene granules or else to restore the earlier duty structure of 10 percent duty on both raw materials.