Recently, the Pakistan Pulp Paper & Board Mills Association made an appeal to the government for a level playing field. The association contended that the local paper industry cannot compete with duty free/sales tax free imports while the local industry is being taxed at full rates.
The background to this appeal is the international market conditions of the paper industry. China has enforced legislation related to environment protection which has resulted in the shutting down of units in different sectors within the paper industry. Therefore, China has started importing paper from all over the world while banning waste paper imports, causing paper prices to become volatile.
In the local market, prices of final products have fallen to unprecedented level due to uneven demand and supply conditions. Imports quantity of newsprint paper has risen as the price per unit has fallen to a low of Rs56 per kg. The association, in their appeal contended that the news print paper was being used to produce text book and exercise books due to which units within the industry were forced to shut down 3 days per week in 2017. While paper products are struggling however, packaging is flourishing.
Various factors are driving the growth in the packaging sector. The Punjab Food Authority has imposed an embargo on the sale of open-food products through its Food Regulation 2017. FMCG sector, a major driver of packaging demand, is seeing double digit growth. Increase in awareness of hygiene and urbanization all boost demand for packaging.
Thus it comes as no surprise that major players are undergoing expansion plants. Roshan packages last year incurred Rs832 million for expansion projects of its corrugation plant.
Cherat Packaging Limited installed a new Universal Papersack line that has a capacity of more than 135 million bags per annum last year. Century Paper has approved plans for installing additional capacity up to 130,000 metric tons per annum of Coated Board, subject to technical and financial feasibility.
The paper and paperboard industry contributes marginally to LSM at 2.3 percent. However, it grew by 7.2 percent in the last fiscal year as per SBP’s report. Its growth is being driven by the packaging sector which has been positively impacted by LSM’s growth as it supplies the packing of products.
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