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Run up to the Budget: Paints sector
Key Inputs
Titanium Dioxide Rutile and Anatase
grade, Pthalic Anhydride (PAN), Organic Pigments, Penta-erythritol (Penta),
Orthoxylene, Glycerine, Paraxylene and Mineral Turpentine Oil (White Spirit).
Duty Structure
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FY (2000-01)
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Customs (%)
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Excise (%)
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Basic
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Surcharge
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CVD
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SADD
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Items
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35
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3.5
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16
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4
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16
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Titanium Dioxide
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35
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3.5
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16
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4
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16
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Pthalic Anhydride
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35
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3.5
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16
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4
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16
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Pigments
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35
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3.5
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16
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4
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16
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Orthoxylene
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15
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1.5
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16
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4
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16
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Paraxylene
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5
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0.5
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16
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4
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16
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Penta-erythritol
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35
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3.5
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16
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4
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16
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Background
- The Rs 60 bn Indian paints industry has shown
an accelerated growth rate since 1992. The reduction in excise duty from 40.25%
to 16% and customs duty from 90% to 46% has helped increase the demand for
paints.
- Total production of paints in the current fiscal
year is estimated at 550,000 tons
- The industry has witnessed a marginal slowdown
in this fiscal year. Growth in sales is unlikely to exceed 12% against 14-15%
in the previous year. The slowdown is more marked in industrial paints as
against the decorative segment.
- Profitability of this sector has declined. Aggregate
net profits of seven prominent companies have fallen by 12.8% in the first
nine months of this fiscal year. However, the trend in profitability is not
uniform. While net profits of Asian Paints, ICI India and Bombay Paints have
declined in this period, that of Goodlass Nerolac, Berger Paints and Snowcem
have increased.
- The recent hike in international and domestic
oil prices has resulted in higher raw materials cost for domestic paint industry.
- Prices of key solvents like mineral turpentine
(white spirit) and xylenes have risen by 21.8% and 34% respectively during
Jan-Oct 00. Price of Penta-erythritol has gone up from Rs 62.65 per kg to
Rs 66.90 per kg in the same period. Prices of other solvents have also increased.
Previous budget (FY 2000-01)
announcements
The basic customs duty was reduced
from 40% to 35%. As a result, the effective customs duty on Titanium Dioxide
has reduced to 42.5% from 44% in the previous year.
Budget Wish List and Expectations
- Customs duty on Titanium Dioxide (TD) is same
as that of the finished products. Hence, it is argued that the duty on TD
should be reduced. With crude oil prices going up TD prices are also on the
uptrend. This should partly offset the recent increase in TD prices.
- The down turn in auto sector during FY 2000-01
has led to a slowdown in sales of automotive paints. Any measures to boost
the automobile sector will have a positive impact on paints industry.
Key Players
Asian Paints, Goodlass Nerolac,
ICI India, Berger Paints, Jenson & Nicholson, Shalimar Paints, Snowcem India,
Bombay Paints etc.
Rediff-Dun & Bradstreet Budget Impact Analysis
Budget 2001
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