India's paper industry reportedly has raw material shortage and high energy costs, needs modernization, improved productivity, additional capacity; most of India's good-quality paper has to be imported due to domestic shortage

India , November 16, 2013 () – Paper industry in India is dominated by a few major players, the rest of the 600 mills being comparatively very small. Demand for paper is growing at eight to nine per cent annually, but there is acute shortage of raw material for producing good-quality paper, which has to be imported.

Paper manufacturing has contributed to knowledge revolution. Printed books and newspapers have emerged as the most important medium of education and communication.

At the global level, paper consumption is around 3500 lakh metric tonnes (MT) per year, and it is growing fast. In India, the estimated turnover of the industry is Rs 25,000 crore approximately. Its contribution to the exchequer is around Rs 2918 crore. The industry provides employment to more than 1,20,000 people directly, and to 3,40,000 people indirectly.

Current trends

The government completely de-licensed paper industry with effect from July 17, 1997. There are around 600 paper mills in India, of which 12 are major players. The Indian Paper Manufacturing Association (IPMA) has 19 member mills.

According to IPMA, per capita paper consumption had gone up to 8.3 kg a year as of December 2008, compared to 7.5 kg during 2007-08. The figure is 42 kg in China, and 350 kg in developed countries. The Indian paper industry accounts for about 1.6 per cent of the world's production of paper and paperboard.

India's domestic paper industry is estimated at around one crore tonnes. Of this, the writing paper segment accounts for 37 lakh tonnes, and the newsprint segment for 17 lakh tonnes. All segments are growing at eight to nine per cent. The paper industry is both energy intensive and resource-intensive.

The industry is dominated by small- and medium-size units. The number of mills having capacity of 50,000 tonnes per annum or more is not more than 25. Less than half a dozen mills account for almost 90 per cent production of newsprint in the country.

In view of raw material shortage, paper mills depend on substitutes like agricultural wastes, growing special crops and, in some cases, using wild plant material. Of course, these alternatives have some environmental costs.

Paper prices

Paper companies raised the prices of coated paper, high-end copier paper and specialty paper in January 2012. The increase was two to three per cent, or Rs 1000 to Rs 1500 per tonne, with effect from the first week of January 2012.

Bilt and JK Paper, the two producers of coated paper, increased the price by Rs 1000 to Rs 1500 per tonne to around Rs 52,000 per tonne. An increase of Rs 1000 per tonne was affected in high-end copier paper. The topend copier paper was available for Rs 62,000 per tonne, while specialty and ledger paper was selling at Rs 56,000 and Rs 53,000 per tonne, respectively.

Paper exports/imports

Paper imports are on the rise. India imports only certain specialty papers and paperboard, mainly coated varieties and art paper. From three lakh tonnes of paper and paperboard imports in 2005-06, inward supply rose to five lakh tonnes in 2010-11. Currently, around five per cent of the total consumption of paper and paperboard is imported. Almost similar quantities of paper/paperboard are exported.

In 1980-81, 3,71,000 tonnes of paper and paperboards, valued at Rs 187 crore were imported. By 2008- 09, these increased to 16,07,000 tonnes, valued at Rs 8141 crore. In 2011-12, these stood at 25,86,000 valued at Rs 12,305 crore.

In the newsprint segment, India imports more than half its demand; the country also exports a small quantity. During 2010-11, nearly 12.2 lakh tonnes were imported against total consumption of around 20 lakh tonnes. About 9000 tonnes were exported.

Some problems

Raw material (wood, bamboo, bagasse, wheat straw or recycled fibre) shortage continues to be a major problem for paper industry in India. Rawmaterial component alone in paper production constitutes more than 30 per cent of the cost of paper. Countries like Brazil, Indonesia, China, Thailand, Canada and Scandinavia follow industrial plantation policies to access wood in a cost-effective manner.

The problem with India is that it does not have a robust system of waste-paper collection, sorting and grading. Mills also have to live with low availability and high cost of agro-residues. The cost of power is also high in India.

For raw material, most mills de pend on government-controlled forests. At times, the cost of collection and transportation works out to be greater than that of the pulpwood. The total input cost has made the industry most uncompetitive in comparison to major producers of the world. The subdued global economic scenario, particularly in the US and Euro Zone, is currently impacting the world paper market.

Measures needed

We have to manage paper consumption scientifically: we can reduce wastage through changes in consumption patterns. Increasing use of electronic mail and communication will considerably reduce paper consumption. For packaging, we may have to depend on reusable bags.

Recycling is increasingly viewed as an answer to paper shortage. Of course, it has some costs of its own. But, it offers substantial savings over the use of virgin pulp.

The paper companies feel that they are not responsible for fall in forest cover. The reason is, in India, paper industry is agro-based, not forest based. The very small fraction of forest wood used is by the state forest development corporations as per approved working plans.

The industry is sourcing wood as raw material from farmers who are helped to grow a few pulpable varieties of trees like Eucalyptus, Subabul, Acacia, Casurina and Popular on their mostly de-graded land. Many mills are already wood-positive as they are planting more trees than their consumption needs. A large chunk of paper is also manufactured by utilising agri-residues like bagasse and by waste-paper recycling.

As a part of the agro-forestry initiative, IPMA members have set up state-of-the art R&D centres for developing high-yielding saplings, which are given to local farmers and land owners every year at subsidised rates for plantation on their marginal lands. Farmers enjoy an assured market for their produce and get market price in return. Thus, the non-productive land is converted into an economic entity, besides greening of arid tracts.

There is a growing need to modernise the Indian mills, improve productivity and build new capacities. Considering the need for creating additional capacities, the government has to encourage direct foreign investment in paper industry.

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