Economic Highlights
New
Delhi, 1 July 2008
Indian Paper Industry
INNOVATION IS NEW MANTRA
By Radhakrishna Rao
One of the oldest enterprises in the
country, the Indian paper and newsprint industry, which currently employs
around 1.3-million people, is up against a variety of problems. These include a
massive and regular increase in the price of wood pulp in the international
market, escalating cost of petroleum products, which in turns has pushed up the
energy and transportation costs as well as dependence on obsolete technologies
and outdated machineries and an all-round increase in labour wages. Though
there are over 500 paper and newsprint production units in India, not even
10 per cent of theses are big or dynamic enough to turn out quality paper
products at a competitive price.
Though the highly segmented Indian
paper industry uses a wide variety of technologies and feedstock’s, the bulk of
the production is concentrated in the hands of few large players. For instance,
over 60 per cent of the newsprint production in India is concentrated with a few
state-owned units like Hindustan Newsprint Ltd (HNL) and Tamil Nadu Newsprint
and Papers Ltd (TNPL). As pointed out by the Development Council for Pulp Paper
and Allied Industries, “Inadequate supply and high cost of raw materials, sub-optimal
and obsolete technologies and accelerating energy costs are the main issues
facing the industry”.
The biggest stumbling block for production
units keen on attaining self sufficiency in wood pulp is the prevailing
environmental laws, which prevent the industrial plantations of private sector
on degraded land stretches. Against this backdrop, the Indian paper and
newsprint industry has already urged the Government to amend the laws with a
view to permit them to make use of the degraded land for raising plantations of
fast-growing trees. But, the Government is yet to respond. As such many of the
leading paper mills in the country have taken to social forestry schemes under
which small and marginal farmers are provided saplings and know-how for raising
plantations of fast growing trees with an assurance of a buy back at a
remunerative price.
Not long back, bamboo was the most-favoured
raw material of the paper mills. But with its prices shooting up as a result of
rapid depletion of bamboo forests, the mills do not find bamboo as a cost-effective
feedstock. Not surprisingly then, many of the paper production units are now
using bagasse, rice and wheat straw instead. Though an estimated 55-million tonnes
of bagasse is available, only eight per cent is currently put to use for paper
production.
Given the above, many paper and
newsprint production units are working towards becoming self-sufficient in wood
pulp and other feedstock’s, used in paper manufacturing. For instance,
Ballarpur Industries Ltd (BILT) has now drawn up a 20-million Euro plan for the
modernization and augmentation of the facilities at Sabha Forest Industries (SFI)
of Malaysia,
acquired earlier. The SFI facilities are expected to start operations by
2009-end and renovations would include putting in place a new wood handling
line, rebuilding the cooking plant and fibre line and upgradation of white
liquor plant.
South India-based Seshasayee Paper
and Board Ltd, is now close to commissioning its new pulp production mill
designed for boosting the pulp production. Once the expanded pulp mill capacity
is in place, the company will initiate work on boosting its paper manufacturing
capacity with an additional investment of Rs 3,000-million. The modernization
programme will see its in-house pulp production going up to 440-tonnes a day
from 240-tonnes a day.
As of now, both the companies operate
a 150-tonne day wood pulp mill and 90-tonne a day bagasse pulp mill. The new
pulp production facility of the company will make for elemental chlorine-free
production process. Clearly, the modernized pulp production unit will
strengthen the position of the company by making available the required
quantity of high-quality pulp in-house. On another plane, this would free the
company from its dependence on imported wood pulp, the prices of which have
been on an upward swing for over a year now.
To stay competitive both in the
domestic and global markets, the Tamil Nadu government-owned enterprise TNPL has
unveiled an ambitious action plan to invest Rs.10,000-million for expanding its production capacity to
4,00,000-tonnes a year from the present 2,45,000-tonnes. TNPL known for its
range of products including printing and writing paper and copiers and newsprint,
is also mulling to put up a cement production unit that would make use of waste
lime sludge generated from its paper-making operations and fly ash generated in
its power boilers.
Of course, realization of the two
plans is subject to the State Government approval and TNPL is yet to work out
the strategy for raising funds for capacity expansion at its paper mill. But
then the proposed cement plant would help TNPL boost its bottom-line by a
substantial extent. For increasing
prices and occasional scarcity of cement, in the backdrop of booming
construction in the country, will help TNPL make a “fat profit” from the cement
production unit. Perhaps it is the first Indian paper and newsprint production
unit to have hit upon this idea. It has also completed its Rs.6,000-million
pulp mill expansion programme with the setting up of a state-of- the-art pulp
production facility designed for elemental chlorine-free production process.
On the other hand, Paper Boards and Specialty
Papers Division (PSPD) of the FMCG (Fast Moving Consumer Goods) giant ITC has
gone in for an innovative range of products with an eye on emerging as the
largest outfit in the paper production sector. “Our specialization in producing
value-added paper boards has made us
realise the huge potential for
creating gifts and toys for 200 million
children, from the new borns to 15 years of age,” is ITC’s aim. Its Bhadrachalam
facility is now producing 4,00,00 tonnes of paper boards and fine paper a year.
The disposable paper cups by ITC are
now fast catching up in the market. Currently, ITC is active in supplying
disposable paper cups to hotels, restaurants, soft drinks outlets and beverage
companies such as Coca Cola India Inc, PepsiCo India Holdings Pvt Ltd and
Nestle India Ltd. As pointed out by the
firm, “given the rapid changes in
lifestyle, we feel that the time is right to enter the consumer segment to
popularize at home consumption.”
ITC’s market analysis shows that the
market for disposable paper cups is worth about Rs.10,000-million a year. The
company is trying to create a new category of space with Spectra brand of paper
cups. According to an analyst, paper cups may not generate huge revenues but it
is a logical progression for ITC’s paper
business. As it is, ITC has already made public its plan to invest Rs 25,000-million
by 2009 to make more innovative paper products and also to boost its production
capacity to 2,00,000 tonnes .
The PSPD has a unique business and revenue generation
model. It started operations in 1979 in Bhadrachalam primarily because it was a
forest area and provided access to raw materials. However, by early 80s strict
regulation on the use of forest resources was introduced and this forced PSPD
to look for alternative sources of raw materials. Thus it forayed into the farm
forestry programme by tying up with small and marginal farmers to raise
plantations of fast growing trees.
Farmers who earlier used to earn
Rs.10,000 per hectare from paddy now earn Rs.25,000 per hectare by planting trees. Around 77,000 hectares
of land is now covered by ITC’s social forestry scheme. In addition to sustaining the supply of raw
material for its paper and paper boards production facility, the farm forestry
scheme had helped address the critical environmental issues relating to biomass
depletion, soil erosion and water scarcity, while enabling the company to
sequester twice the amount of carbon emitted from its operations and contribute
to the national goal of climate change mitigation. –INFA
(Copyright,
India News and Feature Alliance)
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