The Economy
The Indian Economy is in the midst of a sea change over the last few years when we set about to restructure it. The results are finally showing up in the way in which our policy makers intended them. As we move into the fag end of 1994-95, there are visible signs of optimism. GDP growth is expected to touch 5%. Foreign Exchange reserves will cross US $ 25 billion.Inflation, hopefully, will be contained below 8% Industry. After a long recessionary spell, is already growing at 8%. Indeed the economy is poised for a take-off.

Although the economic score board is quite impressive, there is no scope for any complacency or the stage is not yet ripe for throwing caution to the winds. For one, inflationary pressures can erode the competitive edge. Secondly, the export surge needs to be maintained, so that the trade balance, is maintained. Thus while the performance of the economy initially is definitely a cause for optimism, efforts must continue in the coming years to ensure that growth is sustained. To my mind, this will require the following :

The Paint Perspective
The Question that naturally arises at this point is, What about the Paint Industry ? In the rapidly changing economic scenario how our own Industry is fairing ? Before we try an answer to this query, a reference to the immediate past is perhaps necessary.

Towards the late eighties and early nineties the duty rates on paints were progressively increased, to rapid decline in the industry’s performance for four successive years. During 1988-89 to 1992-93 the duty rate was increased in steps from 26.25% to 40.25%. Correspondingly the percentage growth record over respective previous years were: (-) 6.20, 0.26, (-) 5.91 and 0.67. Added to this was the bane of ever increasing raw material costs. An inevitable decline in demand for paints followed leading to the Industry being forced to cut capacity utilisation from 69 percent to 55 percent over the period. Growth was virtually stagnant and in fact there was negative growth also on some occasions.

This is the picture of the immediate past. Things, however, started to change for the better about a few years ago with the introduction of the policy of liberalization. Although the Paint Industry has not yet been given the full benefits of the Chelliah Committee recommendations on Tax Reforms, the Industry has nevertheless responded admirably to the small reductions in duty rates effected in the last few Budgets. Thus while the effective duty rate went down from 40.25% to 35% during 1993-94, a drop of about 13%, the growth of the industry during this period was about 11%, compensating for almost the entire reduction in revenue collections due to lower rates. Similarly, in 1994-95, when the rate has been reduced from 35% to 30%, i. e. a little over 14%, we expect the Industry to grow by about the same proportion. We are certain that Government will not lose on duty collection because of this rate cut, rather the collection may actually be more.

This is precisely the point which we made at a meeting with the Finance Ministry. We placed three points before them. Firstly, the Paint Industry has the potential to grow and elevate itself to an aggressive growth path if it has the support of a reasonable duty structure. We pointed out that the Paint Industry’s growth was fastest during the 70s when the rate was 15%. If a similar rate is reintroduced, as was also the recommendation of the Chelliah Committee, there would be an immediately upsurge in production, as the idle capacity of about 45% would then be straightway energised. The resultant additional production would more than off-set revenue losses.

Inadequate Paint Usage
Secondly, on the demand side, there is enormous scope and need for larger use of paint in our country. Compare the per capita consumption of paint in India and some of our neighbours in Far East and South East. Against India’s 300 gms per year, the figures in South Korea is 9.61 kg., Japan 16.44 kg., Taiwan 16.58 kg., Malaysia 4.63 kg., Philippines 3.55 Kg., Thailand 1.15 kg. and so on. Such minimal use of paint is unobtrusively eating into our national assets. The Central Electro-Chemical Research Institute at Karaikkudi, had estimated loss due to corrosion as 4% of GNP i. e. around Rs. 8000 crores for India. Besides, 10% of the annual metal output is estimated to go for replacement of corroded materials. Successful and adequate application of available paints can, in their opinion, effect a saving of Rs. 1500 to Rs. 2000 crores annually for the country. Fortunately, awareness about this aspect is now discernible in all quarters and the use of paint is gradually getting the importance that has been long overdue to it. The theme of our present scenario is "Fight Corrosion with Paint". I believe there could be no better theme than this at the present juncture when it is most important to drive home the message of protection from corrosion losses.

Employment Generation
The third important point we mentioned to Government Officials is about employment generation. The paint Industry is endowed with great potential for employment generation. Large-scale paint units employ directly between 1000 to 1500 people per Company. Thus taking the average employment at 1250 per Company, the total direct employment of only the seven large-scale paint Companies comes to 8750 people. This apart, they have huge number of branches and extensive dealer network which cover non-urban and even remote areas. This offers Scope for considerable direct employment at local levels. In addition, the SSI paint sector which is predominantly labour intensive and contributes about 35% of the total production, offers very large employment since there are innumerable paint factories in the small and tiny sectors. In the tertiary sector also, the Industry can generate considerable man-hours. Usage of paint requires the services of applicators of paints.

An average painter can apply 4 to 6 litres of paint on a surface in a day. Hence use of 1200 to 1800 litres of paints per annum creates one man’s employment in a year. The Government which is looking for generation of employment in the country, should be doing everything to encourage the paint industry which, if it grows in volume, can produce not only direct employment but substantial indirect employment as well.

SSI Sector Units
A word is necessary in respect of small Scale paint units which comprise of about 35% of the industry, are capable of generating substantial employment. They, therefore, need encouragement. However, they are receiving conflicting signals. While their exemption limit of Rs. 30 lakhs is in need of urgent revision upwards, in the current year’s Budget the exemption limit has in effect been further reduced by excluding thinners from this exemption. This has particularly affected many SSI paint units adversely, since a large portion of the production of these units consists of thinners. We have been urging Government for quite some time to increase the exemption limit from Rs. 30 lakhs to at least Rs. 75 lakhs. It is also necessary to readjust the rates of relief from Excise Duty for the SSI units :

• for clearance between Rs. 75 lakhs to Rs. 2 crores the relief should be 20% of the normal effective rate, subject to minimum effective rate of 5%
• for the slab between Rs. 2 crores to Rs. 4 crores of clearance, the relief should be 10% of the normal effective rate, subject to minimum effective rate of 10%
• normal effective rate of duty should apply for clearances beyond Rs. 4 crores.

Environmental Consideration
Every society has responsibility to so operate that it leaves a healthy and clean environment for posterity and the Paint Industry is committed towards its obligations in this respect. Research and Development is being directed more and more towards water based and water thinnable products with lower consumption of petroleum solvent, thus serving a dual purpose of providing environment ally friendly products and also conserving scarce petroleum based solvents. There is need to encourage this and Government should consider giving substantial benefits for expenditure on this account and additional benefits by reducing levies on sales of such paints. Indian paints Association is also Co-operating effectively with the Bureau of Indian Standards in the matter of standards for Eco-friendly paints.

The Future
This then is the background in which we operate at the present moment. Where do we go from here ? What does the future hold in store for our Industry ? Well, I for one is thoroughly confident that the Paint Industry has indeed a very bright future ahead. We have the capability, the wherewithal and the dedication to achieve a quick take-off to a higher tangent of performance. Given the right policy framework, I have no doubts that the Paint Industry will be going great guns in the near future and add significantly to the overall well-being of our economy. I am sure that the plan of action and the modus operandi for the coming years would throw new lights and open up new vistas of prosperity and growth for the Paint Industry in India.