Wednesday, August 6, 2008

Tile manufacturers seek sops to bolster growth

Preeti Pandey
Mumbai , Nov. 25
THE Rs 2,300-crore domestic tile manufacturing sector, hit by tight margins and increasing inflow of low-priced imports, is in the process of seeking tariff changes to facilitate growth.
The industry plans to urge the Government to introduce anti-dumping levy on imported wall and floor tiles, reduce customs duty on raw materials to 10 per cent from the existing 25 per cent and mandate imported tiles to follow standards issued by bodies such as the Bureau of Indian Standards.
Industry players are also seeking more flexibility in the Export Promotion Scheme for Capital Goods Import.
Over the last one-and-a-half years the industry has seen a 15 per cent drop in prices and return on investment due to the inflow of `inferior tiles' from China, Malaysia and Indonesia. Imports are estimated to touch Rs 100 crore this year, fuelled also by the appreciating rupee against the dollar. As opposed to this, Indian companies are faced with a strong Euro on export of raw materials and machinery from Italy and Spain.
"Dumping has affected us badly since we are a capital-intensive industry with a 1:1 ratio between turnover and investments. Hence any drop in prices directly affects our margins," Mr Vijay Aggarwal, Chairman, Indian Council of Ceramic Tiles and Sanitaryware (ICCTS) and Managing Director, H&R Johnson, told Business Line.
At present, the Government levies an anti-dumping duty of $8.6 per square metres for vitrified tiles from China and $0.75 per sq. m. on imports from the UAE. To avoid the duty, some importers have even "wrongly classified vitrified tiles as glazed tiles."
"Levying anti-dumping duty is, however, a temporary measure. The Government should strengthen the industry," said Mr Shreekant Somany, Managing Director, Somany Tiles.
With India being a price-sensitive market, consumers are attracted by imports that are 30 per cent cheaper than the domestic product. "Moreover the perceived quality of foreign goods are still seen as better," Mr Somany added.
The organised sector of the Indian tile industry estimated at over Rs 2,000 crore is expected to grow at about 12 per cent to 15 per cent, and the unorganised segment valued at Rs 300 crore to Rs 500 crore would grow at about 20 per cent to 25 per cent.
To cater to this growing demand for tiles within the domestic market, companies envisage investments to the tune of Rs 500 crore over the next two years along with expansion of production capacity by 25 per cent.
"Unless the anti-dumping issue is addressed, manufacturers are liable to develop cold feet on making further investments," said an official.
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