Face-to-face: “We strongly believe in the Swadeshi movement”

The Directorate General of Anti Dumping & Allied Duties (DGAD) has released the preliminary findings on the subject of anti-dumping investigation concerning imports of digital offset plates originating in or exported from China PR and Japan on 16 March, 2012. A further hearing took place on 10 April, 2012. The final findings will be effective only after the finance ministry issues the customs notification.

Admittedly, there are two camps, comprising almost exclusively TechNova on the one side and printers on the other. Whichever side one swears by, the fact is, the authorities have held, "the imports of the dumped product increased by approximately four times between 2007-08 and 2010-11. Import of digital plates from countries other than China, declined to almost nil volume. This was due to price under-cutting by Chinese producers relative to prices charged by non-Chinese exporters to India."

Print Bulletin hosted a face-to-face with Pranav N Parikh, chairman and managing director of TechNova and Ranjan Kuthari, president of All India Federation of Master Printers. Anand Limaye and Ramu Ramanathan spoke to the two stalwart on the issue of anti-dumping duty (ADD) and its impact on the Indian printing industry.

Anand Limaye (AL): On behalf of the Mumbai Mudrak Sangh, we welcome both of you industry stalwarts who have honoured our request and come here. This is an attempt to create awareness among the industry about what exactly is going on concerning TechNova’s petition for anti-dumping duty (ADD) on digital plates imported from China. Whenever we speak to other printers, we observe many printers are not aware of the full facts on this issue. Our objective is to record the facts that you would like to present.
Pranav N Parikh (PNP): Mr Limaye, we thank you for this opportunity. One finds that there is a lot of misleading information floating around and this is a very constructive format for us as well as the AIFMP to be able to clarify the facts concerning TechNova’s petition for ADD against Chinese imports of digital plates. As far as the preliminary findings are concerned, I would say that the DGAD authorities have done a remarkable job of investigating the facts in a comprehensive and objective manner. It has taken them a long time, almost a year. But at the end of it they have documented all the facts in a very dispassionate manner. However, from TechNova’s perspective, there is one major deficiency. The DGAD has chosen to recommend protection for the domestic industry in the form of a reference price for each importer, categorised by products, instead of adopting the normal practice of imposing a fixed amount of ADD.

AL: Why this recourse to reference price?
PNP: Reference price based anti-dumping duty can be circumvented by those exporters who choose to do so, by resorting to the simple mechanism of over-invoicing their products at the reference price and compensating the buyer for the difference between the over-invoiced price and their actual price, either in cash or in kind, in India or elsewhere. This is especially simple for those exporters who channelise their imports into India through their wholly-owned subsidiaries. All they need to do is to increase their transfer price to the reference price level and compensate their subsidiary in any number of ways.

AL: Did this happen in the case of PS plates where reference price was declared by the DGAD some 4-5 years ago …
PNP: Yes, the dumping of PS plates has continued unabated. We have already submitted documentary evidence of how Chinese exporters have been circumventing the reference price on PS plates.
(Here a representative of TechNova showed a non-confidential copy of a letter written by a Chinese exporter to an Indian importer describing, with precision, how he can circumvent the reference price mechanism through over-invoicing and then remitting the difference between the over invoiced price and the actual price into the private bank account of the Indian importer anywhere in the world).
PNP: The commonly adopted practice for anti-dumping cases is to impose a fixed amount or percentage of ADD, and not a reference price. In our petition we had made a specific request for ADD in the form of a fixed duty and not reference price. Sadly, this has been ignored by the DGAD rendering ineffective their otherwise fair Preliminary Findings.

AL: Can you explain how the Reference Price mechanism actually works? And what will be the resultant amount of Anti-dumping Duty?
PNP : Let me quote from the preliminary findings document, Paragraph 139 on page no 45 : Anti-dumping Duty will be “equal to the difference between the amount indicated in the column 9 of the table below (i.e. $5.84 for Thermal plates) and landed value…”.  What is landed value is given on page number 48 of the preliminary findings where it says, “Landed value of imports for the purpose shall be the assessable value as determined by the Customs under the Customs Act, 1962 and all duties of customs except duties under sections 3, 3A, 8B, 9 and 9A of the Customs Tariff Act, 1975.” The sections specified refer to countervailing duty (CVD) and special additional duties. Therefore, in simple terms, landed value means the CIF price of imports plus basic import duty of 7.75% plus landing charges of 1%.

AL: Based on this how does one compute the amount of ADD?
PNP: To illustrate how to compute the amount of ADD, let me take the example of thermal plates, where the reference price recommended is US$ 5.84 per sq/mtr. If the imports are at say CIF price of $5.20 per sq/mtr, the formula would be:

Step 1 : Landed Value computation : CIF $5.20 + 7.75% normal import duty + 1% landing charge = Landed Value of $5.65

Step 2 : Anti-dumping Duty computation : Ref Price of $5.84 less Landed Value of $5.65 = Anti-dumping duty of $0.19 (= approx Rs.9.50 per sq. mtr.) This works out to approx 3.3% Anti-dumping Duty if the Chinese imports are at CIF $5.20 per sq/mtr.

 
The view from the AIFMP

Ramu Ramanathan (RR): Thank you Mr Parikh. Now Mr Kuthari, we would want to know what the Federation’s position is in this matter.
Ranjan Kuthari (RK): As far as the printing industry growth is concerned, our primary concern is to see a normal supply channel without abnormal increase in cost to us. This is our fundamental and foremost concern. On the presentations given by various importers, various manufacturers, we took a decision that we should not look at the postmortem of the subject. We should look forward. We did a prediction of the scenario for the next three years.

RR: What are your projections?
RK: We find that in 2013-14, with demand remaining on the same basis as projected in the preliminary findings, there will 100% utilisation of domestic capacity for digital plates, which according to the preliminary findings, is currently 18 million sq/mtrs. The demand for digital plates, thereafter, will exceed the domestic capacity by 20%-30%. Today, India’s per capita consumption of printed material is among the lowest in the world, and our industry is growing at 4% faster than the GDP growth of the country. Hence, after three years, we will definitely need to import 25%-30% of our consumption. We have, therefore, submitted to the DGAD that import equal to 25%-35% of our consumption should be allowed to be imported without any ADD i.e. at the normal rate of import duty of 7.75%.

RR: You’re a big believer in the Swadeshi movement …
RK: In the same breath, we strongly believe in the Swadeshi movement started by Mahatma Gandhi. Today, India is among the only six countries in the world to have domestic manufacturer of digital plates. I have seen TechNova’s plant and it is of international class. We know that countries where local manufacturing has stopped and the industries are dependent on imports only, prices of products have shot up and how the industries are suffering because of that. Today we get technical support immediately from domestic producer and our inventories are almost just-in-time thanks to their distribution system. If we do not have a domestic producer, we will be without our shirts and trousers.

RR: Any further comment …
RK: It is equally important to ensure that the domestic plate producer is not forced into closure. We should ask the MNCs as to why they went to China to set up their plants instead of India even though India is geographically ideally located to serve this region, and our GDP growth is rapid.

RR: The other concern for the print industry is, the multiple voices emerging even within the AIFMP. You have innumerable associations and bodies and presidents. Some of them speaking to PrintWeek India directly and some of their comments have been fairly adverse.
RK: In a country like India, do you find any association or any party where there is no cross-talk? It’s a part of life in a democratic institution. We cannot stop any voice or else we become dictators. Some people may talk some people may not. Fortunately we did not fall in the trap of any NGO promoting the Federation’s views. We have seen what happened to the nuclear plant in Tamil Nadu, so we have not involved any NGO as our spokesperson or taken financial support. We, as the All India Federation of Master Printers have taken our independent path and maintained our focus on the welfare of our printers.

RR: What according to you is the welfare of the printers?
RK: We believe that the welfare of our printers is best served by allowing 25%-30% of consumption without anti-dumping duty, on the one hand, and ensuring survival of the domestic producer, on the other hand.
 
RR: But we need clarity on this matter. As President of the AIFMP how do you counter the dissenting views that are emanating from various associations and representatives in the industry?
RK: If somebody writes something, the next day he gets a reply from me. I have a right to write to any of our affiliates. I don’t think there is anyone who has published a report harmful to the industry, who can point out that I have not mentioned to them or spoken on phone that please stop it, you will land the industry in a problem.
PNP: I would like to comment on what Ranjanji has just said. It is really heartening to have the Federation president take a very fair and balanced view. The points he has made and the concern he has expressed are also valid from the AIFMP perspective.


Plate capacity

RR: Mr Parikh, what is TechNova’s position on the number game about plate capacity?
PNP: As far as capacity is concerned, for your information, we have a capacity of 32 million sq/metres., which has been verified by the DGAD. This consists of digital as well as analog plates, current digital capacity being around 18millionn sq/metres per month. It is easily possible for us to increase the capacity of digital plates through output enhancement of current digital lines through affordable investments in balancing equipment. In addition, we can also convert our analog lines into digital lines through investments in upgraded projects. Thereafter, we have plans to install a new digital line for which we have already reserved the space in our new plant as well as created the necessary infrastructure. Hence, coping with the increase in demand is already on our plans.

RR: How do you respond to the charges of over-investment in capacity among certain quarters …
PNP: It might interest you to know that Kerala Master Printers’ Association has, in their article published recently on the PrintWeek India website, mentioned that TechNova should not have invested in increasing its capacity three years ago in anticipation of demand. The AIFMP is telling us that their main concern is that we will run out of capacity in three years time. We are confused! But clearly, we know that a responsible manufacturer always creates capacity in anticipation of demand to ensure uninterrupted supplies to its customers. This is exactly what TechNova has been doing for the past 40 years of its existence, and has every intention of doing so in the future.

RR: So you assure the AIFMP members …
PNP: Yes, we would like to assure the AIFMP that we will be ready to deliver more than the total demand of India on a continuing basis, well before the demand crosses our capacity.
 

All about pricing

Ranjan Kuthari (RK): In addition to capacity, we are also concerned about the price issue. If the Anti-dumping Duty is imposed, and the cost of imports shoots up, TechNova will also increase its price unreasonably.
PNP: Once again, we can fully understand that this is a primary concern of every printer. However, let me illustrate how this concern is unfounded.

Anand Limaye (AL): How? Please explain.
Pranav N Parikh (PNP): Please consider the following facts. First, TechNova’s track record of its totally transparent and cost-linked pricing policy. As the AIFMP will confirm, even after imposition of ADD on PS plates 4-5 years ago, TechNova did not take any advantage. Also, when TechNova introduced its thermal and later violet plates, though the prices of imported plates were significantly higher, TechNova did not resort to profiteering. As a result, the printing industry has saved several hundred crores of rupees. TechNova has no intention to take undue advantage of ADD, if any, is levied on digital plates.

AL: What about pricing?
PNP: I was coming to that. The prices of digital plates in India are the lowest in the world. Even the DGAD have stated in their preliminary findings that Fujifilm China, have underpriced their exports to India by 35%-40%; Kodak China, by 20%-25% and Lucky Huaguang Graphics China, by 75%-80% as compared with normal prices. So it needs to be kept in mind that the Indian printers are enjoying an exceptionally low price, thanks to the domestic producer.

AL: Is this true for commercial print firms as well?
PNP: Bulk of the commercial printers use thermal plates. The total cost increase due to ADD on imported thermal plates, e.g. from Kodak China, if it is honestly implemented without circumvention, will be in the range of Rs 8 to Rs 15 per sq/mtr based on the published prices at which the imported thermal plates are coming into India. This means a cost increase ranging from approx 3% to 6%. This needs to be viewed in relation to the total cost of plates in a final printed job. In case of packaging materials and newspapers, it is less than 1%. In case of most types of commercial jobs, it is less than 3%. To be specific, the average consumption of thermal plates of a commercial printer is approx 300 sq/metres per month based on the total consumption of thermal plates divided by the total number of offset printers using these plates either directly or through service bureaus. Bear in mind that a service bureau consuming over 3,000 sq/metres of plates per month typically supplies imaged plates to more than 100 printers. Therefore, the total average cost increase of a commercial printer per month for imported plates would be say Rs 10 x 300 sq/mtrs = Rs 3,000 per month or Rs 36,000 per year. Not Rs 21 lakhs as published by the Kerala Master Printers Association and Mr Ranesh Bajaj of Creed in his comments in PrintWeek India.

AL: And violet plates and UC CTP plates …     
PNP: As far as violet plates are concerned, the ADD would be applicable only on imports from China, not Japan or any other country. I am sure you are aware that now not a single square metre of violet plate is imported from China. All the imports are diverted to Netherlands, and brought in at Chinese prices. As for UV CTP plates, the ADD is higher than for thermal as these plates were being dumped into India at PS plate prices i.e. at prices substantially lower than their Normal Price internationally. Once again, TechNova will remain steadfast in its resolve not to take any advantage of it, even assuming that the Anti-dumping Duty will not be circumvented by wrongly invoicing the plates as PS plates or through over-invoicing.

AL: What is TechNova’s main objective for the ADD petition?
PNP: Our objective in petitioning for ADD is not to take pricing advantage but to ensure protection for our survival against clearly unfair competition and restoration of level playing field. As you are probably aware, there were over 150 plate manufacturers worldwide in 1990, spread over 40 countries; the number today is less than 10 located in only six countries. 140 players have been compelled to exit the plate business through either closure of being acquired by the Big Three MNCs. As a result the market share of the Big Three MNCs has increased from less than 40% in 1990 to more than 90%. We hope that our customers and the AIFMP will actively prevent TechNova from becoming the 141st player to be forced into either closure or acquisition by the MNCs. The other independent surviving player, IBF, Brazil, has been saved from this fate by timely introduction of ADD in Brazil 3-4 years ago.

At this time, I am tempted to ask you a question: why is it that the printing industry is failing to recognise the fact that prices of every other consumable such as paper, ink, varnish, blankets, rollers, etc. have escalated hugely over the past few years whereas TechNova’s plate prices have not. Why are our efforts to be transparent and fair all through these years not being rewarded with instant and warm support for our survival?! Instead, we are being branded as “monopolist”. I don’t expect you to answer it, but please think about it.


The C factor
AL : There is another school of thought and a suggestion: why can’t TechNova have a plant in China?
PNP: Virtually every industry in India is threatened by China. Please consider what would happen to the Indian economy and its social fabric if the government decided not to support any industry and instead encouraged it to move to China and shut down its plants in India? US and Europe allowed this to happen at great cost and grief, and are now aggressively reversing their policies and levying heavy ADD on Chinese imports. Also, please consider: Do you think any Chinese player including say TechNova China would need to export plates into India at below their normal prices if TechNova India ceased to exist? Will the Chinese government need to continue providing subsidies?
RK: I must add that through its technical collaboration with Agfa, directly or indirectly Technova does exist in China.
PNP: Yes, if TechNova merges with Agfa China, we would have a plant in China!

RR: Mr Parikh, if one were to flashback to your PrintWell days, would Pranavbhai of Printwell be comfortable with 27% import duty on plates?
PNP: Ramu, somewhere, the facts are mixed up. Import duty is not 27%. Import duty is 7.75%. The balance is Countervailing duty (CVD). We, i.e. domestic manufacturers, have to pay excise duty, which is exactly the same amount as the countervailing duty. Therefore, it’s a complete misnomer to say that the tariff protection is 27%. The tariff protection is only 7.75. It is very easy to cross this hurdle for the Chinese exporters thanks to the huge subsidies they receive from their government.

RR: Would you support ADD on plates though there is no ADD on other consumables of the printing industry?   
PNP: As to the other consumables, it depends entirely on the merits of each case. I am not qualified to comment on it. What I am told is that newsprint manufacturers applied for ADD a few years ago and lost the case. The entire newspaper industry, I understand, became heavily dependent on Chinese newsprint. Suddenly, it seems, they increased their prices by 18% last year as domestic competition was virtually non-existent.

AL: Why is your petition only against Kodak and Fuji and not Agfa?
PNP: We can only petition against those companies that are dumping plates in India and their imports are more than 3% during the Period of Investigation (POI). Agfa does not export plates to India. The reason they do not and cannot do so is due to non-compete clauses in our technical collaboration agreement with them. Reciprocally, we cannot export our digital plates in competition with Agfa.


What about UV CTP?

RR: What is the status on CtCP or UV CTP. There is a lot of debate on whether to include or not to include it; and whether it is a analogue or a digital plate. What is TechNova’s position on that.
PNP: Basic controversy whether CtCP plate is an analog plate or a digital plate was settled by the KMPA themselves. They have given in writing that “…digital plates are very economical and convenient for the printing industry, as the image from a computer is directly transferred onto a plate..” Since we all know that in case of UV CTP plates, images from computers are transferred directly on to the plate, without the use of any intermediate film negative or positive. So KMPA have themselves defined UV CTP plates as digital plates and not PS plates. And we completely agree that this is the correct definition.

RR: What is the Chinese position?
PNP: The Chinese plate researchers also agree that UV CTP plates are digital plates as per a white paper done by them, published in the Punjab Print magazine about 4-5 months ago. It very beautifully describes how UV CTP plates are digital plates and how well they compete with thermal and violet plates, and differ from PS plates. It is a 4-5 page research paper. They say it is a study conducted in China. Also websites of Chinese plate manufacturers classify UV CTP separately from PS plates. In fact if you look at websites of UV CTP equipment manufacturers, they only accredit and recommend use of approved UV CTP plates; they do not guarantee performance if a non-accredited plate is used.

RR: Is there an increase in UV CTP plate usage?
PNP: That is another clear evidence; the huge shift in plate consumption from PS plates to UV CTP plates by service bureaus and others who have installed UV CTP systems. Why would they spend more for the UV CTP plates if the PS plates served their purpose? Technically the thing to consider is: we know that the light sources used for imaging PS plates and UV CTP plates are radically different. PS plate requires a metal halide lamp whereas the UV CTP plate requires a UV laser light source.

RR: What about the coating?
PNP: One may argue that all types of offset plates, PS, UV, thermal, violet, inkjet are coated with “sensitive” coatings – whether to light or to heat or to inkjet ink – and therefore, they are all pre-sensitised or PS. In trade practice, however, each plate is used with a different imaging technology, has different manufacturing costs, requires different levels of investments in exposing and processing equipment, serves different applications, and so on … There are other differences which have also been dealt with by the DGAD in their report. Finally, let me say that those who say that UV CTP is nothing but PS, do not require UV CtP plates and should not be concerned with the status of UV CTP with regard to ADD.
RK: Our submission to the government authorities on this is quite clear that make a foolproof law so that nobody can import CtCP plates classifying them as PS plates. The problem is that if the government labs put it for testing, they cannot differentiate between CtCP plates and PS plates.
PNP: I am in complete agreement with Ranjanji that ADD on CtCP i.e. UV CTP plates will be attempted to be circumvented by bringing them in as PS plates. In fact, this has also happened with thermal plate imports from China. However, technically, it is very feasible for the customs, in their labs, to differentiate between PS and UV CTP just as they can do for thermal and PS. We have written to all the customs departments how this can be done. Whether they do it or not is another matter. But the fact remains that the methodology is there.


High rate of investment

RR: The other theory that seems to be floating around is that TechNova continues to infuse huge amounts of capital, claim low returns, five-fold depreciation and then cause of injury. Year on year balance-sheets in the submission indicate that. Mr Parikh, do you have a counter argument to that?
PNP: Ramu, if TechNova had not invested in a state-of-the-art manufacturing plant and Agfa’s patented technology, there would be nil manufacture of digital plates in India. Entire industry would have had to continue importing these plates at significantly higher costs. The country would have lost over a billion dollars of forex. Printers would have had to carry significant inventory and suffer from supply chain disruption and lack of tech support. Did we do wrong by making this investment?

RR: So, the investments are valid?
PNP: All investments are made after factoring in ROI based on ruling prices. We suffered huge losses not due to our investments but due to the fact that MNCs operating in China drastically dropped their prices to ensure that we are driven to bankruptcy, after which they could once again raise their prices to their earlier prices. These facts are clearly documented in the documents published by the DGAD.

RR: What about your new world-class plant which Mr Kuthari spoke about?
PNP: We initiated the investment in the new plant well before the dumping started; had we known dumping will start from China, and we would not be protected, we would naturally not have invested. Whether or not we made losses is easily verifiable and has been verified by the DGAD officials. We had even offered to the AIFMP that an independent party, such as one of the big four accountancy firms can be appointed to verify whether or not TechNova has incurred losses. What I am wondering now is: if we now expand our capacity to meet the growing demand as the AIFMP President is advising, will we again be criticised by the KMPA for doing so?

This article was published on 25 April 2012 and received 319 views