In its pre-budget memorandum to union government, the association quoted a report prepared by the Centre's high powered committee on pulp and paper.In 1994-95, paper imports were around Rs 1,500 crore. By 2000-01 the figure is ikely to rise to Rs 5,753 crore and then to Rs 8,632 crore by 2005-06. In the financial year 2010-11 imports are likely to be around Rs 12,376 crore. The association noted that the future plans and investment of the Indian paper industry are affected by the flooding of cheaper imports into the domestic market.

"The fluctuations in international prices are crippling the domestic industry and thereby increasing the country's dependence on foreign markets for a basic and essential commodity like paper," the memorandum said.

The domestic paper industry is going through a lean phase with a continuous fall in demand from eightper cent per annum to four per cent per annum. This has resulted in an overall low capacity utilisation of 66 per cent and also a piling up of unsold finished stocks in the mills. The memorandum said that in December 1997, inventory at the mills were for 27.7 days as against 10.4 days in December 1995.

The adverse market conditions have forced corporate houses to shelve or defer their greenfield projects and their credit ratings have been downgraded.

According to statistics provided by the IMPA, the installed capacity for paper production in India is 42 lakh tonnes, against an annual production of 28 lakh tonnes. Demand for paper is to the tune of 27.5 lakh tonnes. While the country exports one lakh tonnes of paper, the imports stand at 1.8 lakh tonne per annum. As a result an excess of 2.1 lakh tonnes of paper is available in the domestic market.

To reduce the deficit of raw material, like wood logs, chips, pulp and waste paper, the IPMA has asked the government to do away with the import duty of 10per cent on pulp and waste paper.

"The government should exempt payment of import duty on pulp and waste paper till such time the industry is able to generate raw material through utilization of degraded forest land as proposed by the Indian pulp and paper industry to the government of India," the memorandum noted.

The industry has also asked for a flat import duty of 12 per cent on input materials like calcium carbonate, rosin, sodium sulphate, starch and lime which currently stands at 30 per cent and titanium dioxide, soap stone and wire and felts, which have a 40 per cent import duty.

The IPMA has urged for an exemption of service tax on transportation. Its memorandum says: "Service tax on transportation affects all industries in general and paper industry in particular. For manufacturing one tonne of paper, nearly seven tonnes of input are required and all these inputs are transported from different corners of the country. This tax is already affecting the paper industry and in fact is a majorconstraint to making the industry cost competitive."

The IPMA has, once again, asked the government to allow the corporate sector in the reforestation of degraded lands. "Such a policy will not only lead to the development of forest based industries in India but will also result in creation of large scale rural employment as well as increase the country's green cover," the memorandum added.