High paper cost puts packaging businesses in a tight corner

Packaging businesses, struggling to stay afloat amid rising raw material costs, have blamed a syndicate of paper manufacturers for destabilising the marketr and the one-sided fiscal policy laid out in the 2019-20 budget for their plights.

According to the Bangladesh Local Carton Manufacturers Association, 40-50 packaging factories have already shut down due to the impacts of the coronavirus pandemic and due to the absence of the government's attention to their sufferings.

The association said there are about 2,000 small and large packaging factories across the country.

These are mainly engaged in making packaging for garments, medicines, beverages, edible oil, tobacco products, chemicals, confectionery, cans, bottles, ceramics, textiles, cosmetics, biscuits and dairy products.

Around 10 lakh people are employed in the sector – both directory and indirectly. But the crisis has taken away 10-15% of jobs, compelling the workers to switch to other professions. None of the businesses received funds from the stimulus packages announced by the government during the pandemic, said the association.

The raw material for the packaging industry comes mainly from 70 local paper mills.

At a press conference at the Dhaka Reporters Unity (DRU) on Monday, the association also put forward five demands to overcome their losses and prevent factories from shutting down.

Ruhul Amin Rana, the owner of a packaging carton factory, told The Business Standard, "In the 2019-20 budget, the tax rate on products of paper mill owners has been reduced from 15% to 5-7%, whereas we have been paying 15% tax for the last 18 years."

He questioned the discrimination against the packaging industry.

"On 30 March 2018, paper mills all of a sudden increased the prices by Tk10,000 per tonne, leaving small and medium packaging entrepreneurs to incur huge losses. Bank loans of many have increased sizably," Rana added.

Speaking to TBS, Ashikur Rahman, owner of the "Bhai Bhai Packaging" carton factory said they buy newsprint from paper mills for Tk38-42 per kg which is much higher than the international rates. But paper mills buy waste papers from packaging factories at only Tk15-16 a kg.

"By selling packaging cartons, we can get 5-6% profit after deducting all expenses. Even in such a miserable situation, we did not stage any protests," he added.

"Paper mills from time to time increase the price of our raw materials Tk8-10 without any prior notice, leaving us to incur losses. We the small traders cannot survive in this volatile market," Ashikur said.

MA Bashar Patwari, president of the association, said, "We want the policy to be equal for all. The government should ensure that mill owners do not suddenly increase paper prices by syndication and thus destabilise the market."

Shahjahan Kamal Saju, vice-president of the association, said that the government has imposed 15% VAT, 10% customs duty and 5% AIT in the import policy of the packaging industry, making it difficult for the sector to import the raw materials.

"It has provided local paper manufacturers with an opportunity to make a syndicate. Therefore, for us, the import policy should be eased, the price of paper should also be fixed in Bangladesh adjusting to the international price," he added.