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The worst hit are the comparatively small newspapers and magazines

By Syed M. Aslam
Sep 25 - Oct 01, 2000

Rising international prices and the continuous weakening rupee-dollar parity have pushed prices of newsprint to record highs for the discomfort of the Pakistani publishing industry which entirely depends on imported newsprint as a primary raw material.

During last one-and-half month the CIF prices of newsprint has registered a drastic increase of 25 per cent. The situation is worsened by the shedding of value by the rupee against the dollar with the introduction of the free-floating system last month resulting in wild fluctuations. With the withdrawal of the control by the central bank, the State Bank of Pakistan, the exchange rate has soared to as high as over Rs 60 in the open market.

The newsprint stocks which are usually stored in the bonded warehouses are subjected to the import duties and taxes at the time of release on the exchange rate on that particular day. With the weakened rupee the release of newsprint from the bonded warehouses is costing more and more in import tariffs and taxes to increase the landed costs.

This in turn has resulted in inflating the prices of newsprint by as much as Rs 8,000 per tonne to Rs 44,000 in a course of just 4 weeks, a tremendous increase indeed. In terms of kilogram this means an increase in the price of the newsprint from Rs 35 to Rs 44.

While the increased newsprint prices has left no sector in the publishing industry untouched the worst hit are the comparatively small newspapers and magazines which can not afford to import the basic printing material themselves and the expenses it requires to store and guard it. Only a handful of big publications including a few large publishing groups and a limited mass circulation newspapers and magazines chose to benefit from the traditional newsprint quota policy. The majority remained dependent on buying their own newsprint from the open market at whatever prices it was available.

The measure which was seen by the observers to appease the large publishing groups enjoying an all pervasive influence on the public opinion resulted in the creation of a black-market as only a portion of the allocated newsprint quota was used by these large publishing houses while the rest finds in the local market.

It was in this backdrop that the present government extended the booking of the newsprint by the commercial importers besides the traditional consumers in the print media. Today commercial importers can book newsprint at the same rate of duties and tariff as that applicable to the newspapers and magazines.

However, the recent surge in the international prices of the newsprint in addition to a rupee which keeps on losing value on any given day are proving to be the proverbial two-edge sword to push the cost to an unaffordable level, particularly for small publications be it a newspaper or a periodical.

The worst sufferer of the drastic increase in the prices of newsprint are the small newspapers and periodicals who due to reasons of pure economics prefer to buy the newsprint from the open market. Unlike the handful of big publishing houses enjoying mass circulation, the large majority of small newspapers and magazines have to absorb the increased cost of newsprint which pose a cause of great concern for them. Though hurting, the smaller newspapers and magazines have thus far been absorbed the increase as newsprint price make up between 12-15 per cent of the total production cost. However, like everything else they would only be able to absorb the cost up to a certain level after which they would either be forced to increase the price of their publications and face a possible backlash in reduction in readership or slash the number of pages, a no less difficult option.

While newsprint prices have been on the rise over the years what is worrying is the fact that they have never registered such wild fluctuations over such a small period as witnessed in the recent months. During a brief duration of just four days last week the price of a ream of art paper increased by Rs 150 to Rs 2,750 while that of a ream of 55 gram newsprint increased by Rs 40 to Rs 600. This represent 11 per cent increase in the cost of newsprint.

What is even more disturbing is the fact that the newsprint prices are not expected to come down in the near future, for the same two reasons which fuelled it in the first place surging international prices and the weakening rupee and the uncertainty that where will it stop. Newsprint producers in North America are reportedly booking the product for the next month at Rs 45,000 per tonne.

This is also evident from the announcement by world's largest newsprint maker, Montreal-based Abitibi-Consolidated Inc., predicting increased earnings in the fourth quarter this year way back in June. Abitibi attributed its improved second-quarter earnings of Canadian $61 million on sales of C$1.48 billion compared with earnings of C$35 million same period last year. It cited continuous rise in newsprint prices for the improved financial performance.