Budget Impact on Paints Sector
Overall Impact - Moderately Positive
Customs Duty
As key raw materials such
as titanium dioxide, phthalic anhydride and pigments are imported, the reduction
in peak customs duty from 35% to 30% will reduce the landed cost of these inputs.
The industry is susceptible
to the threat of cheap paint imports from China and the US, on account of reduction
in the peak customs duty rate.
Customs duty on paraxylene,
another key raw material, has been hiked to 10% from the existing level of 5%.
| Product |
Customs (Basic)
|
|
|
2000-01
|
2001-02
|
2002-03
|
|
Titanium Dioxide
|
35%
|
35%
|
30%
|
|
Phthalic Anhydride
|
35%
|
35%
|
30%
|
| Pigments
|
35%
|
35%
|
30%
|
| Orthoxylene
|
15%
|
15%
|
15%
|
| Paraxylene
|
5%
|
5%
|
10%
|
| Pentaerythritol
|
35%
|
35%
|
30%
|
Excise Duty
Excise duty structure
remains unchanged.
Other changes
Many domestic paint
companies are investing abroad to maintain their growth momentum. The last few
years have seen Asian Paints taking over Delmerge Forsyth & Co in Sri Lanka
as well as the paint business of Australia-based Pacific Paints, Berger Paints
acquiring Jenson & Nicholson's plant in Nepal and Snowcem acquiring 50%
stake in Brown & Co, a Sri Lankan paint company.
The Budget announcement enabling Indian companies
to invest up to US $ 100 mn on an annual basis through the automatic route,
as against the existing limit of US $ 50 mn is expected to aid companies with
overseas expansion plans.
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