People And Their Problems

New Delhi, 2 June 2007

India’s Paper Industry

SCARCE RAW MATERIAL PROBLEM

By Radhakrsihna Rao

India’s fast-growing paper industry, which is ranked as the 15^th largest in the world, has for many years now been saddled with the problem of sky rocketing prices of raw materials on account of their dwindling availability within the country.

Rapidly depleting stock of bamboo forests in the country due to severe ecological disturbances is considered a major factor behind the declining availability of raw materials for the industry which employs around 1.3 million people.

The demand for paper products in the Indian market is on a steady upward curve. And to meet the growing demand for paper products the Indian paper industry has now launched a high profile expansion and modernization plan.

Worried over the not-so-rosy prospects on the raw materials front, the Indian Paper Manufacturers’ Association (IPMA) has come out with a proposal of tripartite association between the land owner, land user and the paper producer to ensure a steady supply of raw materials. As per the policy proposal of IPMA, the land holding size will be in the range of 5-50 hectares and will be given on a lease of upto 30 years through a process of competitive bidding. And it is envisaged that the revenue from crops will be shared between the stakeholders. Against this backdrop, the IPMA has sought 1-1.5 million hectares of degraded land near paper mills for raising plantations meant to meet the raw materials need of the industry. 

The IPMA sources drive home the point that apart from improving the forest cover in India, this arrangement would help generate employment opportunities in rural areas of the country. This proposal which has already been cleared by the Union Ministry of Forests and Environment is awaiting the nod of the Indian Cabinet.

Of course, for quite sometime now the Indian paper industry, which has been growing at the rate of 6 per cent, finding it difficult to source bamboo and pulp whose prices in the international market have zoomed to new heights. As an industry insider says, international pulp prices have jumped by about 7% last year from US$560 a tonne to $600 now, forcing the paper producers jack up the prices of their products by an average of Rs.2,000 a tonne.

India’s top ranking paper manufacturing enterprise, the Bilt, in addition to expanding its farm forestry operations has bought Sabha Forest industries in Malaysia to ensure that the shortage of pulp together with its rising prices does not have a constraining effect on the expansion plan of the company.

In South-East Asian countries such as Malaysia and Thailand, the Government allows private companies to grow plantations for pulp manufacturing. However, the Government policy in India does not allow forest plantations for pulp manufacturing. So the companies are forced to depend on market sources to meet their wood requirements, says B. Hariharan, Group Financial Director of the Bilt.

Meanwhile, the paper industry sources in India say that in view of the shortage of wood-based pulp, share of the agro wastes in paper production would go up to a substantial extent in the years ahead. Interestingly, since 1970, the share of wood as a raw material in India’s paper production has declined from 84% to 36%. On the other hand, the share of agro residue and waste paper in India’s paper production matrix has increased from 9% and 7% to 29% and 35% respectively. 

As observed by R.R. Vederah, Managing Director of the Bilt, “the share of recycled paper would go up for companies such as the Bilt, West Coast Paper Mills and JK Paper, which are undertaking demonstration of better management practices through the increased use of high yielding, clonal plantations across the large part of the country to ensure better yields as part of their farm forestry operations.”.

On the other hand, V. Kumaraswamy, Vice-President (Finance) of JK Paper says, “the industry has already moved from a five year plantation cycle to a three-year cycle. Effort is on to make it a one year cycle. Once it is achieved, farmers will not hesitate to turn to plantations. It would fetch them revenues on an annual basis like any other crop”.

The need of the hour for the Indian paper mills is not only to expand the captive farm forestry schemes but also to diversity their technological base, so as to accommodate a wide range of feedstocks. However, as things stand now, Indian paper mills use just around 10% of an estimated 5.5 million tonnes of baggasse---a sugarcane waste---generated in India annually. 

However, in the context of pollution and raw materials scarcity nagging India’s paper and pulp sector, Indian paper companies have been focusing on enhancing their captive raw materials supplies and building capacities in a bid to offset the tougher operating environment. For instance, Amrit Banaspati Company Ltd located near Hoshiarpur in Punjab is giving an increasing thrust to using farm residues as an input for paper manufacturing. Simultaneously, the capacity of its in-house husk-based captive power plant would be enhanced from 9 MW to 12 MW to support the increased manufacturing capacity.

Meanwhile, a number of leading paper mills are busy implementing their modernization and expansion plan with a focus on “cleaner production technology and use of diversified feedstock”. The Government-owned Tamil Nadu Newsprint and Paper Ltd. (TNPL) has drawn up an ambitious expansion plan to boost its production capacity from 2.3 lakh tonne per year to 3.65 lakh tonne a year with an investment of Rs.6,500 million by installing a new paper mill which will be operational by 2009-10. The TNPL is focussing on exploiting the growth in the branded copier paper and note book segments with a view to improving its margin over a period of time.

Incidentally, the TNPL which has set up an effluent treatment plant based on activated sludge process, claimed to be the best in the country, makes available treated water to irrigate 1,500 acres of farmland in the vicinity of the mill. On the other hand, the Government of India-owned Hindustan Paper Corporation (HPC) says that as part of its eco-friendly production strategy it has realized a zero disposal of solid waste.

However, for the medium and smaller paper companies in India, resources crunch would prove to be a major hindrance in going in for “greener and cleaner production technologies”. As such, it is suggested that such paper mills should be provided support by the Government through part-funding of a common facility for treating effluents.---INFA

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