2006 Budget – Effect on the Packaging Industry
An article by Subramoni Chidambar
The 2006 Union Budget bodes well for the Indian Packaging industry. It has provided a lot of benefits for either the industry itself or for large end-user segments like the Food Processing sector, which will in turn generate more business for the industry.
The Packaging industry has benefited from a reduction in customs duties on various items. Import duties on Metals (Tin, Aluminium and Steel) have been brought down from 10% to 7.5%. Since “plastics are important raw materials”, customs duties on major bulk plastics (EVA, Polymers of Ethylene, Polymers and Copolymers of Propylene and Styrene and Polymers of Vinyl Chloride) have come down from 10% to 5% and those on Naphtha used for the manufacture of specified Polymers have been brought down from 5% to nil. Import duties on DMT, PTA and MEG (raw materials for Polyester) and Caprolactum (raw material for Nylon) are down from 15% to 10%.
Excise duties on specified varieties of printing, writing and packaging papers have been brought down from 16% to 12% as ‘’paper finds widespread use in education as well as in packaging.” The reduction has been effected “in order to encourage capacity addition.’’
‘’Packaging machines serve a wide variety of industries, including food processing’’ and, so, the Finance Minister has proposed a reduction in customs duties from 15% to 5%.
Major benefits have been announced for the Food Processing industry. In the words of the Finance Minister, ‘’Recognising the enormous benefits that the food processing industry can bring to agriculture and job creation, and to consumers, food processing will be treated as a priority sector for bank credit. NABARD will create a separate window with a corpus of Rs. 1,000 crores for refinancing loans to the sector, especially for agro-processing infrastructure and market development.’’
Excise duties have been reduced from 16% to 8% on ready-to-eat packaged foods, vegetable protein and instant food mixes, condensed milk, ice cream and pasta. Processed meat, fish and poultry have been exempted from Excise duty (they were earlier subject to 8% duty). Excise duties on aerated drinks have also been educed from 24% to 16%. All this will mean a considerable reduction in their selling prices, which should boost their consumption and lead to increased packaging requirements.
The only major end-user of packaging to suffer was the cigarette industry where excise duties have gone up by about 5%.
