Paper mills set to face additional costs

The standard tax for the recycling of packaging made from corrugated will double in Russia in 2018, thanks to the latest decision of the Russian government. The decision came as a surprise for many of Russia’s leading casemaking paper mills and sparked much criticism as to the likelihood of the unplanned increase to their costs. According to producers, this will have a significant effect on prices for corrugated packaging. They also said this will also lead to a shift from paper packaging to plastic, which is contrary to the latest state initiatives to reduse polyethylene packaging.

The responsibility of paper producers and importers to utilise waste paper products and packaging or pay an environmental fee was officially introduced in Russia at the beginning of 2017. However, according to initial state plans, these standards should be increased gradually - and this is not the case.

According to estimates, with an increase in the utilisation rate of up to 40%, about 6 million tonnes of waste paper will become subject to the new taxes. The current processing capacities in Russia are estimated at only 4.15 million tonnes, which is 1.5 times lower than necessary. The latter means about 1.85 million tonnes of waste paper will remain unclaimed, while producers will have to allocate funds from their reserves for the establishment of additional processing capacities.

According to estimates, the needed investments will be equivalent to 4.625 billion rubles (US$63 million) at an environmental fee of RUB 2,500 (US$42) per tonne in Russia. This sum of RUB 4.625 billion, according to analysts’ predictions, will result in the increase in prices for the finished products. The Russian government expects the new measure will allow it to generate up to RUB 5 billion (US$80 million) of additional revenues to the Federal budget.

"Such a significant increase of the financial burden on the industry makes us think about alternative types of packaging, for example, polymer," says Lybov Melanevskaya, an official spokesman of RusPEK, (a public association which unites representatives of many Russian businesses). According to her, this will block the latest initiative of the Russian state to limit the use of polymer packaging and even lead to the opposite effect - beginning a boom in polymer packaging. She also added the majority of such packaging would be sent to landfill after use, because of the absence of a separate collection system in the country.

In November 2017, the President of the Russian Union of Industrialists and Entrepreneurs, Alexander Shokhin, sent a letter to the government, saying that corrugated packaging does not pose a threat to the environment. He also said that increasing the tax thresholds a few weeks before the end of 2017 would lead to an unplanned and unjustified increase in costs for corrugated box makers.

A source in the Russian government says the government understands that such a large increase in recycling costs will be a nasty surprise for businesses and will be sometimes unfulfilled. However, the government has said it will control its implementation.

Earlier in 2017, a special envoy of the President on environmental issues, transport and environmental protection - Sergei Ivanov - said polyethylene causes significantly greater damage to the environment than corrugated packaging and asked the Ministry of Industry and Trade to work out the idea of an environmental fee for plastic bags. However, to date, such an idea has not received support from the State.

Source: The Packaging Portal-Brunton Publications
More info: http://www.thepackagingportal.com/industry-news/recycling-fees-hit-russian-mills