The Indian Paper Manufacturers Association has criticised the sharp hike in coal prices which it sees as an effort by Coal India to pass on its own inefficiencies and cost increases.
According to a press release from the association, paper prices in the country are all set to rise in view of the recent steep hike in coal prices.
The paper industry, which does not have core sector status, is dependent on imported coal as mills face erratic supply of quality coal from local collieries. However, the effective Customs duty on coal works out to nearly 10 per cent, and the depreciating rupee has aggravated the situation.
“The prices of wood and other raw materials have already been moving up over the last year, putting pressure on the bottom-lines of paper companies. The sudden and unforeseen 40-140 per cent hike in coal prices, after a major price increase last February, will further add to the cost push of the energy-intensive paper industry. The industry finds it extremely difficult to absorb the second dose of price increase by CIL in less than a year,” said Mr Madhukar Mishra, President, Indian Paper Manufacturers Association (IPMA), in the press release.
The coal price hike has been caused despite the Ministry of Coal terming the changeover from the system of Useful Heat Value (UHV) to Gross Calorific Value (GCV) as a price-neutral exercise.
The new price table indicates that price increase is being effected by Coal India under the pretext of the different pricing mechanism followed elsewhere. IPMA sees the move as a one-way process to transfer cost increases and cost inefficiencies to the helpless customers because of the monopoly status of Coal India Ltd. (CIL), said the release, quoting Mr R. Narayan Moorthy, Secretary-General of IPMA.
Paper is an input-intensive industry, with energy costs accounting for 25-30 per cent of total input costs. The increase in input and raw material costs, it is feared, will erode the Indian paper industry's price competitiveness. With the economic slowdown in developed economies, China and Indonesia have found India an easy outlet for their excess capacity.