The Hindu : Tile units need a big push

Online edition of India's National Newspaper
Sunday, Nov 16, 2003

Business

Business

Tile units need a big push

By P. Vikram Reddy

HYDERABAD NOV. 15. The Rs. 3,000 crore Indian tile industry, which is growing at a healthy 12 per cent per annum is looking to better it with a 15 per cent growth for March 2004. But despite this optimism, the industry as a whole is apprehensive on several counts and is hoping for Government intervention to ensure that unfair competition from abroad does not derail its growth plans.

The industry, which has made heavy investments in the last five years to meet the increasing demand is looking forward to Government initiatives ranging from protection to domestic tile industry from `dumping' to addressing issues such as customs duty on raw materials, and abatement on maximum retail price (MRP).

As Vijay Aggarwal, Chairman of the Indian Council of Ceramic Tiles and Sanitaryware (ICCTAS), says "The organised sector itself has pumped in almost Rs. 1,000 crores towards capacity expansions and to develop the infrastructure to offer world class products". But Government intervention is necessary to help the industry combat threat from imports and to sort out other issues concerning levels of duty. "We need Government help and support," he told The Hindu.

The organised sector of the domestic industry, which accounts for about Rs. 2,000 crores is equipped to compete with the best in the world in terms of technology and quality products, but is facing stiff competition from rampant dumping of products at much below their normal value causing hardship to the domestic industry. The Government has imposed anti-dumping charges on imports of vitrified tiles (which has been the growth engine for the domestic industry) from China and UAE.

But despite the duties, Mr. Aggarwal fears that tiles from these countries will be repacked in SAARC countries and pushed into India, thus avoiding anti-dumping duties. The Government, therefore, needs to be vigil to curb this possible evasion of duties and protect the industry. Otherwise the very purpose of levying anti-dumping duty will be defeated, he cautions.

Keeping in mind that a significant portion of the domestic tile industry consists of small scale sector, he feels that the Government should retain the existing rates of basic customs duty at the current level for at least another two years. Since the rupee has strengthened against the dollar, imports are becoming cheaper. But if the duty is maintained at the current level then the domestic players will get sufficient time to upgrade the infrastructure and technology to produce world class products.

Mr. Aggarwal wants the Government to increase the abatement on MRP (meant to basically cover the expenses on freight on finished goods, octroi and sales) to 50 per cent. The present rate of 45 per cent allowed for the purpose of calculation of excise duty is not adequate to cover the cost of transportation to distant areas, thereby increasing the cost of the product. Increase in abatement will make the product more affordable to the masses and huge rural population.

The customs duty on raw material should be reduced to 10 per cent from the present peak rate of 25 per cent, which is the same for both raw materials and finished products, The implication is, he says, that both local manufacturer importing raw material as also an importer of finished product are subjected to the same rate of duty. This puts the local manufacturer at a big disadvantage, and may thwart fresh investment in the industry. The duty on raw material should be reduced to 10 per cent and intermediates to 15 per cent, he says.

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