Import costs of flexible films used in packaging may rise

Infograph: TBS

The import cost of flexible films used in packaging and labelling various products, such as foodstuffs, garments, beverages, medicines and tobacco, is expected to increase in the next fiscal year.

According to finance ministry officials, the government plans to propose an increase in customs duty on the import of biaxially oriented polypropylene (BOPP) films from the current 10% to 15% in the upcoming national budget to provide protection to the local industry.

In 2018, Akij Group set up a plant for the first time in the country for producing packaging films, which are used as raw materials by various industries.

With a fresh investment of Tk1,000 crore, the new venture of the conglomerate has a production capacity of 80,000-90,000 tonnes, which is sufficient to meet the entire local demand.

Akij Biax Films Ltd currently manufactures three types of products used in packaging: BOPP, biaxially-oriented polyethylene terephthalate (BOPET), and cast polypropylene (CPP).

However, officials at the local manufacturer argue that an increase in the import duty alone will not yield the expected results. They emphasise the need to prevent the sale of raw materials imported under the bond facility in the local market, as it poses the biggest threat to the local industry. 

M Hossain Iraz, director (operation) at Akij Biax Films, told The Business Standard, "The government action is certainly important in creating competition between local production and imports."

"When the cost is high due to the imposition of additional duties on imports, the possibility of a misuse of the bond facility will also increase. In this case, without strict government monitoring, the good initiative will not pay off," he added.

According to officials, following an application by Akij Biax Films, the Bangladesh Trade and Tariff Commission analysed the hardships of the raw material importer and producer.

The commission says that while the company has the production capacity to meet local demand, the protection provided to this industry is insufficient, given the current import taxes imposed on raw materials and finished goods, as well as the value related to duty.

Since a 5% customs duty is levied on the import of the main raw material, it becomes challenging to protect the local industry by reducing this duty. Therefore, at the meeting of the committee formed regarding duty reduction, the representative from the National Board of Revenue (NBR) spoke against increasing duty on intermediate raw materials. However, the NBR suggested considering VAT exemption during the stages of both raw materials import and production to support the industry.

Besides, the tax regime suggested that protection can be extended to the local intermediate raw material manufacturing industry by implementing appropriate taxation measures on imported goods and effectively preventing the misuse of the bond facility, according to a report of the tariff commission.